Italy Tax Breaks For Hiring Curb Joblessness Amid Dim Growth

  • January unemployment at 11.5% from revised 11.6% in December
  • Youth jobless rate increases to highest since October

Italy’s unemployment rate fell slightly in January as job creation was aided by tax breaks to reward employers hiring people on an open-ended basis, offsetting the impact of weak economic growth.

The rate dropped to 11.5 percent from a revised 11.6 percent in December, national statistics agency Istat said Tuesday in Rome. The median estimate in a Bloomberg survey of eight analysts called for 11.4 percent. Istat originally reported an 11.4 percent rate for December.

Companies hiring in 2015 benefited from a discount on employer-paid social contributions of as much as 8,060 euros ($8,810) annually for each long-term contract. The measure introduced by Prime Minister Matteo Renzi’s government was a key boost for the workforce, Istat said last week in a separate report.

Executives in both services and manufacturing industries said the break on social contributions was more important than other measures passed by the government to favor job creation such as the so called progressive-entitlement employment contract which was at the core of Renzi’s labor-code overhaul, Istat said in the report based on a survey among 6,100 businesses.

Phasing Out

The Italian economy, the third-biggest in the euro region, returned to growth last year, emerging from its longest recession since World War II. It expanded 0.8 percent in 2015, Istat said in its final  gross domestic product report on Tuesday.

A slowdown in the recovery this year might hinder job creation as the discount on social contributions for employers hiring is due to be phased out this year.

Households and companies grew pessimistic last month amid worsening outlook for personal finance and economic growth. Business confidence fell to the lowest in a year as industrial output in December dropped for the second month in a row and prompted concerns for future orders and production.

There were 70,000 more people employed in January, Istat said Tuesday. Youth joblessness rose during the month to 39.3 percent from 38.7 percent in December, Istat said in the report. It was the highest since October.

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