Italy Jobless Rate Fell to Record Low in 1st Quarter

Italy's unemployment rate dropped to a record low in the first quarter as growth in Europe's fourth- biggest economy outpaced expectations, reported The Bloomberg.

The unemployment rate fell to 6.2 percent from a downward- revised 6.4 percent in the fourth quarter, the Rome-based national statistics office said today. The jobless rate was expected to fall to 6.4 percent from 6.5 percent, according to the median forecast of 15 economists in a Bloomberg survey.

Italian joblessness has declined steadily since 2000 as changes to labor laws make it easier to hire part-time and temporary labor and as legalizing immigration leads to more workers emerging from the black economy. Businesses have also been encouraged by last year's faster-than-expected economic growth, which carried over into the first quarter.

``The economy is showing strong momentum and a further decline in joblessness seems pretty attainable,'' said Susana Garcia-Cervero, senior economist at Deutsche Bank AG in London.

The economy grew a faster-than-expected 0.3 percent in the first quarter as consumer spending, spurred in part by better job prospects, increased at the fastest pace in almost two years. Italy's $1.8 trillion economy grew 1.9 percent last year, topping the government's expectations after stalling in 2005. The Organization for Economic Cooperation and Development last month raised its 2007 growth forecast for Italy to 2 percent, matching the government's prediction.

Still, an increase in the number of people who gave up looking for work contributed to the first-quarter decline in unemployment, an Istat spokesman said. While 52,000 fewer Italians were searching for jobs in the first three months of the year on a seasonally adjusted basis, total employment dropped by 59,000, or 0.3 percent, in the quarter.

``The breakdown is less benign than the headline figure suggests,'' said Marco Valli, an economist at UniCredit Markets & Investment Banking in Milan. ``Employment fell, reflecting the stagnating employment growth in the three quarters leading up to the first quarter of this year.''

Italy's expansion and the fastest growth in the European Union in six years are encouraging companies such as Fiat SpA and Eni SpA to hire workers. Eni, Italy's biggest oil company, is taking on project engineers, contract administrators and buyers for international posts.

Fiat, Italy's largest automaker, will add 950 workers in the coming months at its plant in Cassino, Italy, to build a new version of the Bravo. Fiat's European car sales rose 5.7 percent in May.

The swelling ranks of immigrants accounts for a ``significant'' contribution in employment growth, the Istat spokesman said today.

Within a month of taking office last May, Prime Minister Romano Prodi's government passed a law cutting in half the number of years immigrants need to live in Italy to gain citizenship and setting new quotas for those seeking residency.

These measures, coupled with a clampdown on tax evasion, means that many more workers that habitually got paid in cash are now being hired legally, paying taxes and owning up to forming part of the official workforce.