2026-02-04
EU Unemployment Drops to 5.9% Hitting New Historic Low; Labor Market Resilience Significantly Exceeds Expectations
According to the latest data from DataTrack, the EU seasonally adjusted unemployment rate fell to 5.9% in November 2025, a further improvement from 6.0% in October, continuing to hover at historic lows. This figure was significantly better than general market expectations (external institutions such as Trading Economics had previously estimated approximately 6.3%), indicating that even against the backdrop of slowing European economic growth momentum, corporate hiring willingness has not loosened significantly, and the tightness of the labor market exceeds analyst model predictions.
Observing the detailed structure, the labor market presents a dual divergence of "hot South, cold North" and "strong services, weak manufacturing." According to market information, Southern European countries (such as Spain and Greece) have benefited from the recovery in tourism and services, showing strong employment growth momentum which offsets the hiring pressure in core industrial nations like Germany caused by declining manufacturing orders. In addition, although the youth unemployment rate remains at a relatively high level of 14-15%, it has receded significantly from previous peaks, suggesting that structural reforms are gradually generating employment effects.
Regarding this better-than-expected performance, institutional analysis points to "Labor Hoarding" and "aging demographics" as the two main factors. Research from ING and the European Central Bank (ECB) both mention that because companies experienced the pain of labor shortages after the pandemic, they are inclined to retain existing employees even when facing short-term order headwinds to avoid the higher costs of re-hiring in the future. Meanwhile, the structural supply shortage caused by the shrinking working-age population also provides strong downside support for the unemployment rate.
Looking ahead, the unemployment rate is expected to fluctuate within the low range of 5.9%-6.0% in the short term (1-2 months), supporting household consumer confidence in the Eurozone. However, regarding medium-term risks (3-6 months), close attention must be paid to whether corporate earnings continue to deteriorate; if the manufacturing recession spreads to the services sector, leading to tight corporate cash flows, the "hoarding" strategy currently supporting employment may reverse, potentially triggering a wave of layoffs. This will be the biggest potential variable for the economy in the first half of next year.
Related Reference Sources:
https://www.ing.com/Newsroom/News/Eurozone-unemployment-remains-at-historic-low-despite-economic-uncertainty.htm
https://ec.europa.eu/eurostat/web/products-euro-indicators
https://tradingeconomics.com/euro-area/unemployment-rate