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Eurozone Jobless Rate Lowest Since 2008; Manufacturing Sector Contracts

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The euro area unemployment rate dropped to the lowest since July 2008, despite the ongoing contraction in the manufacturing sector, data showed Monday.

The unemployment rate fell to 7.5 percent in May from 7.6 percent in April, Eurostat reported Monday. The rate was forecast to remain unchanged at 7.6 percent.

The number of unemployed decreased 103,000 from the previous month to 12.34 million in May. Compared to last year, unemployment fell 1.133 million.

The youth jobless rate came in at 15.7 percent in May versus 15.9 percent in April. In the same period last year, the rate was 17 percent.

Despite the likely slowdown in GDP growth in the second quarter, the steady recovery in the labor market continued, Jack Allen-Reynolds, an economist at Capital Economics, said.

But with business surveys remaining gloomy, the unemployment rate is unlikely to fall much further, the economist added.

Labor market data is not strong enough to deter the European Central Bank from loosening monetary policy in months ahead, Allen-Reynolds said.

Germany's unemployment decreased only 1,000 in June after a sharp 60,000 increase in May, the Federal Labor Agency said. The jobless rate held steady at 5 percent.

Meanwhile, Italy's jobless rate fell to the lowest since February 2012, Istat reported. The rate slid to 9.9 percent in May from 10.1 percent in April.

Elsewhere, ECB data showed that credit to the private sector increased at a slower pace of 2.5 percent year-on-year in May, following April's 2.7 percent rise.

According to the Purchasing Managers' survey, the euro area manufacturing sector contracted for a fifth straight month in June amid ongoing global trade tensions and political uncertainties.

The IHS Markit factory Purchasing Managers' Index fell to a 3-month low of 47.6 in June from 47.7 in May. The score was slightly weaker than the earlier flash reading of 47.8.

"The disappointing survey rounds off a second quarter in which the average PMI reading was the lowest since the opening months of 2013, consistent with the official measure of output falling at a quarterly rate of approximately 0.7 percent and acting as a major drag on GDP," Chris Williamson, chief business economist at IHS Markit said.

Operating conditions were generally weak across the single currency area, according to the latest country data. Germany remained the weakest-performing nation.

Germany's final IHS Markit/BME manufacturing PMI decreased to 45.0 from 44.3 in May. The flash reading was 45.4. Although well below the neutral 50.0, the index rose to a four-month high.

France bucked the overall trend somewhat, registering its highest PMI for nine months in June. The indicator rose to 51.9 from 50.6 in May. This reading was also below the flash 52.0.

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