Euro zone unemployment held stable at 10 percent in May, a sign that a long and steady deterioration in the labour market may have stalled, but the outlook remains pessimistic as austerity programmes bite.
The European Union's statistical office also said prices at euro zone factory gates remained subdued in May, in line with expectations, pointing to low underlying inflation pressure.
Eurostat said 15.789 million people were jobless in the 16-nation euro zone in May, 35,000 more than in April. For that month, the figure was revised to 10 percent from 10.1 percent.
Analysts polled by Reuters had expected unemployment at 10.1 percent, the highest level in almost 12 years
"The recent reduced rise in the number of unemployed suggests that a limited pick up in euro zone economic activity since early-2010 is currently helping the labour market," said Howard Archer, chief European economist at IHS Global Insight.
Euro zone joblessness was unchanged thanks to a drop in Germany, the currency area's biggest economy, to 7.0 percent from 7.1 percent, although it increased in crisis-hit Spain to 19.9 percent from 19.7 percent.
It held steady in France and Italy. The lowest unemployment was registered in Austria at 4.0 percent and the highest in Latvia at 20.0 percent.
"Encouragingly, the German rate fell, boosting hopes of a modest consumer revival there. But the news from the periphery was more downbeat. The Spanish, Portuguese and Irish rates all rose, supporting our view that a sustained recovery in domestic spending in these economies remains a long way off," said Ben May, analyst at Capital Economics.
But he noted that that German subsidies that had kept many workers in employed will start expiring later this year.
Spending cuts ordered by many governments to ward off the sovereign debt crisis are also likely to hit the job market and reduce economic growth, economists have said.
NO INFLATION PRESSURE
Unemployment is a lagging indicator, slow to react to the fragile economic recovery from the worst economic crisis in decades. But after hitting 10 percent, the figure has held flat.
Analysts expect unemployment to remain high this year and next, putting a drag on the economy, which needs strong consumer demand to help make any recovery self-sustaining.
Separately, Eurostat said euro zone producer prices rose 0.3 percent month-on-month in May and 3.1 percent annually, in line with economists' expectations.
The annual figure was boosted by energy prices, which were at low levels a year ago.
But modest monthly increases of durable and non-durable consumer goods, 0.2 and 0.1 percent respectively, suggested no inflationary pressure.
This, coupled with fragile growth outlook, is expected to cement expectations that the European Central Bank would keep its main interest rate at a record low of 1.0 percent well into the next year.
Producer prices play an important role for rate-setters as a precursor to consumer price developments. The European Central Bank wants to keep consumer inflation below, but close to 2 percent over the medium term.
Euro zone consumer inflation was 1.4 percent year-on-year in June, Eurostat estimated this week.
