A record high unemployment rate and a faster-than-expected slowdown in inflation to a 3-year low amid easing economic sentiment across Eurozone have intensified the pressure on the European Central Bank to ease monetary policy early May to revive the economy reeling under recession.
An increase of 62,000 unemployed in March took the jobless rate to a new record of 12.1 percent, from 12 percent in February, the report released by Eurostat showed Tuesday. The rate matched economists' expectations.
The severe economic downturn in most of the economies and unfolding austerity measures drag job creation. In addition, the weak economic activity and squeeze on spending helped inflation to move below the European Central Bank's target of 'below but close to 2 percent' inflation.
Inflation in the euro currency bloc hit a 38-month low in April, at 1.2 percent, and reached below the target giving scope for the ECB to lower interest rates this week. Economists had forecast a more modest decline to 1.6 percent.
The European Central Bank is widely expected to reduce its key interest rate by a quarter point to 0.50 percent at its rate-setting meeting on Thursday.
It will be a big disappointment if the ECB does not both cut interest rates this week and announce more unconventional policies to boost bank lending, Jennifer McKeown at Capital Economics observed. But neither is likely to prevent a sharp contraction in the euro area economy this year.
In the 17-nation currency bloc, there were altogether 19.2 million unemployed in March, up 1.72 million from the same period of last year.
The jobless rate in the EU27, remained unchanged at 10.9 percent in March.
Among the member states, the highest unemployment rate was seen in Greece, followed by Spain. In the first quarter, the unemployment in Spain hit a record 27.16 percent, up from 26.02 percent in the fourth quarter.
Meanwhile, the lowest unemployment rates were registered in Austria, Germany and Luxembourg, Eurostat said.
Although Germany's unemployment rate is one of the lowest in the Union, people out of work rose by 4,000 to 2.94 million in April, the Federal Labor Agency reported today. The jobless rate was unchanged at 6.9 percent.
Regional data today showed that Italy's jobless rate held steady at 11.5 percent in March.
With Eurozone GDP highly likely to have contracted further in the first quarter and prospects for the second quarter looking far from bright, IHS Global Insight's Chief European economist Howard Archer said the strong probability is that overall unemployment is heading higher over the coming months.
According to the Eurostat flash estimate, euro area annual inflation weakened for the fourth successive month to the lowest since February 2010 from 1.7 percent in March, largely reflecting a fall in energy prices.
Core inflation that excludes energy, food, alcohol and tobacco, slowed to 1 percent from 1.5 percent in March. The detailed report for April inflation is due on May 16.
Driving the deceleration, energy prices fell 0.4 percent annually in April, reversing the previous month's 1.7 percent increase. Service costs advanced at a slower rate of 1.1 percent than 1.8 percent in March. Costs of non-energy industrial goods were higher by 0.8 percent than a year earlier.
On the other hand, food, alcohol and tobacco prices rose at a faster pace of 2.9 percent, after rising 2.7 percent in the previous month.
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May 22, 2026 14:46 ET Minutes of the latest Fed policy session was the highlight of the week along with survey data on the U.S. housing market. In Europe, survey data signaled the trends in the euro area private sector. Further, consumer price inflation data from the U.K. was in focus. In Asia, various economic indicators from China drew attention to the health of the economy.