Italy Unemployment Rate Stays Unchanged, Prompting Concernsby
Jobless stays at three-year low, youth unemployment at 37.9%
Tax breaks for hirings on open-ended basis to be phased out
Italy’s jobless rate was unexpectedly unchanged in December, signaling the risk that the effect of new labor legislation on hiring might cease without an acceleration of economic growth.
The rate remained at 11.4 percent, a three-year low, national statistics agency Istat said Tuesday in Rome. The median estimate in a Bloomberg survey of seven analysts called for 11.2 percent.
Euro-area unemployment fell in December to 10.4 percent, the European Union’s statistics office in Luxembourg said. The jobless rate in Germany, the region’s economic superpower, unexpectedly declined to a record low 6.2 percent in January, a separate report from the Federal Labor Agency in Nuremberg showed.
Italian Prime Minister Matteo Renzi’s Jobs Act and other legislation overhauling the country’s labor code were implemented in the last two years, making it possible for companies to fire and hire more easily. The new rules also include tax breaks to reward those employers who hire people on an open-ended basis. Some of those incentives are set to be phased-out during 2016, making the option of converting contracts progressively less appealing to businesses.
“Without a full-fledged recovery, further improvements in the labor market seem very difficult,” Giuseppe Ragusa, an assistant professor of Economics at Rome’s LUISS Guido Carli University, said before the data were released. “The benefits of the Jobs Act might have already come to an end," with the rate likely remaining above 11 percent this year, he said.
There were 21,000 fewer people employed in December, Istat said Tuesday. Youth joblessness fell slightly during the month to 37.9 percent from 38 percent in November, Istat said in the report.
A slowdown in the recovery might limit hiring in coming months. For the time being, the jobs being created seem to fall short of the demand for employment across the boot-shaped peninsula. Esselunga SpA, one of the country’s top food retailers, received about 13,000 applications for 100 jobs at its new superstore in Rome, the Milan-based company said on Jan. 27.
Industrial output in the euro region’s third-biggest economy declined 0.5 percent in November, prompting concerns that the recovery may be running out of steam. Business confidence declined for a third straight month in January as executives’ assessment of the outlook for orders and production worsened, Istat said last week.
That contrasts with rising optimism among Italian households. After early signs of revival on the labor market, their confidence rose in past months, signaling resilience in the consumption component that had been boosting growth last year.
The new labor rules favoring the conversion of close-ended contracts in open-ended ones “meet the needs of many people who can feel more secure by accessing credit, for example to get a mortgage, and see room for progress on their career path” Ragusa of LUISS said.
The country’s gross domestic product probably grew 0.7 percent last year, the Bank of Italy said in its quarterly economic bulletin on Jan. 15.