Eurozone unemployment hits joint record low despite recession fears – business live

Eurozone unemployment dips to joint record low

Unemployment in the eurozone has fallen unexpectedly to a joint record low, suggesting Europe’s jobs market remains strong despite the weak growth in the region.

The jobless rate in the eurozone dipped to 6.4% last November, new data from Eurostat shows, down from 6.5% in October, matching the record low set in June.

A year earlier, the unemployment rate was 6.7%.

Economists had expected the eurozone unemployment rate to remain unchanged in November, after the economy shrank by 0.1% in the third quarter of last year.

During November, eurozone unemployment dropped by around 99,000 in the eurozone, to 10.97m.

In the wider European Union, the unemployment rate slipped to 5.9% in November 2023, from 6% in October.

📅 Eurozone Unemployment Rate beating the analyst’ expectations at 6.4% to 6.5% forecasted.

Monitoring unemployment rates closely as a key economic indicator, their decline signals potential growth, while a persistent rise may pose challenges to overall economic health; a… pic.twitter.com/lqnPYuZrEi

— Nova Peak Capital (@NovaPeakCapital) January 9, 2024

Falling unemployment should help workers find jobs and negotiate pay rises, which may deter the European Central Bank from considering cuts to interest rates soon (especially as inflation rose in December, to 2.9%).

Key events

Despite the drop in unemployment in November, the eurozone still has a youth unemployment problem.

There were 2.321 million young people (under the age of 25) unemployed across the euro area in November.

That follows a drop of 54,000 compared with October, which brought the eurozone unemployment rate down to 14.5% in November, from 14.8% a month before.

Compared with November 2022, youth unemployment actualy increased by 49,000 in the euro area.

Today’s eurozone unemployment data underscore why the European Central Bank has no plans to start cutting interest rates any time soon, says Bloomberg, adding:

Even amid the mild downturn, employers are struggling find staff, pushing wages higher and creating upside risks for inflation.

Eurozone unemployment dips to joint record low

Unemployment in the eurozone has fallen unexpectedly to a joint record low, suggesting Europe’s jobs market remains strong despite the weak growth in the region.

The jobless rate in the eurozone dipped to 6.4% last November, new data from Eurostat shows, down from 6.5% in October, matching the record low set in June.

A year earlier, the unemployment rate was 6.7%.

Economists had expected the eurozone unemployment rate to remain unchanged in November, after the economy shrank by 0.1% in the third quarter of last year.

During November, eurozone unemployment dropped by around 99,000 in the eurozone, to 10.97m.

In the wider European Union, the unemployment rate slipped to 5.9% in November 2023, from 6% in October.

📅 Eurozone Unemployment Rate beating the analyst’ expectations at 6.4% to 6.5% forecasted.

Monitoring unemployment rates closely as a key economic indicator, their decline signals potential growth, while a persistent rise may pose challenges to overall economic health; a… pic.twitter.com/lqnPYuZrEi

— Nova Peak Capital (@NovaPeakCapital) January 9, 2024

German industrial output weaker than expected in November

Germany’s economy has taken another hit, with industrial production unexpectedly falling in November, the sixth monthly decline in a row.

German industrial output fell by 0.7% month-on-month in November, the federal statistics office says, extending the ongoing downturn at German factories.

The production of capital goods decreased by 0.7%, while the production of intermediate goods fell by 0.5% and consumer goods output fell by 0.1%, statistics body Destatis says.

Carsten Brzeski, global head of macro at ING, fears there is very little reason for near-term optimism.

The order book deflation of the last two years leaves clear marks as well as ongoing energy and policy uncertainty. With a soft or hard landing of the US economy and still very little positive growth momentum in China, external demand for German industrial production is likely to remain weak. The only upside could come from a turning of the inventory cycle. However, even though there are some very tentative signs of inventory reduction, it would still take until late spring before we could see a significant impact on actual production.

Brzeski also fears that December is likely to bring more negative surprises, with the first signs of economic fallout from the government’s fiscal woes, disruptions in the Suez Canal and reportedly weak Christmas sales.

He adds:

All of this points to another small contraction in the fourth quarter, pushing the German economy into the first – admittedly very minor – technical recession since 2020.

Hays has been hit by a recruitment slowdown in both the UK and globally, says Russ Mould, investment director at AJ Bell.

And that is a concerning economic signal, Mould explains, after this morning’s warning that profits will be below expectations.

“Recruitment stocks are often a good harbinger for the wider economy as companies are keen to hire when they’re feeling confident and tend to freeze recruitment when times are more uncertain.

“In this sense a profit warning from Hays has wider significance. The speed of the deterioration in its outlook will be cause for particular concern.

“The company’s problems look particularly acute in the UK – but with fees as a whole down 10% for the quarter and down an alarming 15% for December, this is a global issue too.

“Hays is cutting its own cloth accordingly and as a cyclical business it is used to dealing with fluctuating fortunes.

“The company may have to batten down the hatches for some time, but it will hope a pivot in interest rates and a reduction in inflationary pressures will eventually lead to an improvement in business confidence and help drive a recovery in hiring activity.

“While this is out of the company’s control, levers it can pull include expanding its ‘enterprise client’ business which sees firms outsource their temporary and permanent white-collar recruitment to Hays. This could help increase the predictability of earnings.”

B&M doesn’t expect material impact from Suez Canal disruption

B&M says it doesn’t expect any material impact from disruption to shipments through the Suez Canal, despite attacks by Houthi militants forcing some shipping companies to avoid the Red Sea.

Alex Russo, the boss of the discount goods chain, told Reuters:

“I don’t expect any material impact for us.

The supply chain for us has sufficient in-built flexibilities so I don’t expect any impact coming into our business.”

Last week, retail chain Next warned that difficulties in the Red Sea could delay deliveries and hit sales in the year ahead.

City AM say it is “a worrying sign of the health of the UK economy” that recruitment giant Hays has been forced to lower its expectations after a difficult December.

Discount retailer B&M has reported a rise in UK revenues in the run-up to Christmas period.

B&M’s UK like-for-like revenues rose by 3.7% in the 13 weeks from 24 September to 23 December, rather slower than in France where they grew by 11.3%, while its Heron Foods business grew by 11.7%.

Alex Russo, chief executive, said,

“The performance across the Golden Quarter has been pleasing, with strong operational execution across the three businesses.

Our strategy remains unchanged – we are an everyday low-price discounter with a laser-focus in keeping excellence in retail standards and our costs the lowest.

This allows us to provide our products at the best price to all customers – many of whom continue to face significant cost-of-living pressures.

B&M has also announced a special dividend of 20p per share for investors. But despite this sweetener, its shares have dropped 0.6% this morning.

Emma Carr, retail partner at law firm Gowling WLG, says:

Despite a slowing in midway-year growth for this discount retailer, its last minute rebound in sales can doubtless be attributed to a rush in last-minute festive sales requirements where the retailer was able to step in and rapidly meet these needs.

Of course, capitalising on this as we move into the New Year period will be key for the retailer, as it looks to utilise its traditionally well-focused supply chain capabilities to deliver against the fortunes of other more mainstream supermarket competitors.

Hays shares slide after hiring slowdown warning

Shares in Hays are down 12% in early trading in London, after it warned that the fall in fees will hits its profits.

Victoria Scholar, head of investment at interactive investor, says:

“Hays has issued a profit warning – it expects first half pre-exceptional operating profit of about £60 million, missing analysts’ expectations, sending shares sharply lower. In its second quarter trading statement it also said quarterly fees fell by 10%, hurt by weakness in December. But the recruiter said it is too early to tell whether this reflects a more sustained market slowdown.

Shares in Hays plunged as much as 19% at one stage this morning and are still down by over 12%. Hiring of permanent staff tends to ebb and flow with the economic cycle. The sluggish global growth backdrop combined with tighter monetary policy has dampened business appetite to pile on additional fixed staffing costs. And while temporary workers typically pick up the slack, Hays said it didn’t see the ‘normal seasonal step-up in worker volumes’ dealing a double blow to the recruitment firm.

Today’s slide reverses much of the rebound in the stock seen since the lows in October. Over a 12-month period shares are down by over a fifth.”

Here’s a full breakdown of Hays’ trading in the last quarter of 2023, showing the “clear slowdown” in global markets:

Germany: flat fees, or up 2% on a WDA basis. Temp & Contracting flat (up 2% WDA), with volumes down 1%, impacted by lower new sales YoY through the quarter. Perm fees flat YoY
UK & Ireland: fees down 17%, with Temp down 13% and Perm slowing through the quarter, down 21%
Australia & New Zealand: fees down 20%, with Temp down 16% and Perm slowing through the quarter, down 27%
Rest of World: fees down 11%. EMEA ex-Germany fees declined by 5%, with Asia down 11%. The Americas continued to be tough, down 25%

Introduction: Hays reports slowdown in hiring

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

December has been a cruel month for UK recruiters, and retailers.

Hays, the global recruitment consultants, has reported that its fees – earned by placing candidates into roles) – fell by 15% last month, as demand from companies looking to fill vacancies slowed.

This led to a 10% drop in earnings across the last quarter, and the slowdown means Hays expects to miss market expectations for profits in the first half of its financial year.

The company is now accelerating its cost reduction and efficiency programmes, and cut its consultant headcount by 5% in the October-December quarter.

In the UK & Ireland, Hays reports that fees fell 17% in the last quarter, including a 13% drop in income from temporary positions and a 21% drop in permanent fees.

The slowdown went further too, with Australia & New Zealand fees down 20%, Asia down 11%, and the Americas down 25%.

Dirk Hahn, Hays chief executive, says it is “too early to say” if December’s weakness shows a sustained market slowdown, or rather that some placements are simply being deferred.

But, Hahn warns, near-term market conditions are expected to remain challenging, citing increased uncertainties and reduced client and candidate confidence.

He told shareholders:

“Overall market conditions became increasingly challenging through the quarter, including a clear slowdown in most markets in December, notably in our Perm businesses as client and candidate decision-making slowed. Temp volumes remained broadly stable sequentially through the quarter, but declined YoY as we did not see our normal seasonal step-up in worker volumes.

As a result, we expect operating profit in our first half to be c.£60 million, despite our ongoing actions to reduce costs.

UK shoppers also cut back last month, leaving retailers suffering a disappointing festive period, new data this morning shows.

Total sales grew 1.7% in December, down from almost 7% growth a year earlier, the British Retail Consortium and consultancy KPMG have reported.

Their report shows there was a slight increase spending in the week leading up to Christmas as consumers scrambled to purchase last-minute gifts. But shoppers shunned clothing, jewellery and technology gifts, opting instead for beauty, health and personal care products, while toys and gaming also sold well.

And households remained cautious about making larger purchases in the post-Christmas sales.

Helen Dickinson, chief executive of the BRC, says:

“The festive period failed to make amends for a challenging year of sluggish retail sales growth.

“Weak consumer confidence continued to hold back spending.”

Also coming up today

Boeing is facing an escalating crisis after loose parts were discovered on some grounded 737 Max jets, days after an Alaska Airlines plane suffered a mid-air blowout on Friday.

Alaska Airlines indicated that its maintenance technicians had found issues when inspecting their 737 Max 9 fleet, saying:

“Initial reports from our technicians indicate some loose hardware was visible on some aircraft”.

The problems don’t end there either; United Airlines said yesterday it had found loose bolts and other “installation issues” on multiple 737 Max 9 aircraft.

Boeing’s shares fell 8% yesterday, as investors pondered the possible fallout from the accident.