In September, 69,000 workers lost their jobs in the 20-nation Eurozone, nudging the jobless rate to 6.5 percent. More than 11 million people across the region are now out of work, 165,000 more than a year earlier, the Financial Times reported.

Economists polled by Reuters had expected the number to remain at its record low of 6.4 percent.

The European Central Bank (ECB) is using the jobless rate as one measure of success in its strategy of raising interest rates to slow inflation.

Unemployment in Germany, Europe’s leading economy, rose to 5.8 percent in September from 5.7 percent in August, the highest since June 2021. Deutsche Bank and chemical giant BASF are among German firms announcing plans to lay off workers.

The unemployment rate grew in part by the arrival of about a million Ukrainian refugees, the Financial Times reported.

The country’s GDP contracted by 0.1 percent in the third quarter, government data released last week showed.

The Institute for Employment Research in Nuremberg said its gauge of future unemployment is giving its darkest signal since mid-2020 when COVID lockdowns paralyzed Europe’s economy.

“We’re seeing first signs that the labor market is softening,” ECB board member Isabel Schnabel said in a 2 November speech. “The more slowly this process unfolds and the weaker it is, the higher the risk that persistent labor market tightness will challenge the assumptions underlying the projected decline in core inflation.”

“Fewer jobs are being created, including in services, which suggests that the cooling of the economy is gradually feeding through to employment,” ECB vice-president Luis de Guindos said in a speech last week.

According to the ECB, Eurozone unemployment will move up to 6.7 percent next year “as gross domestic product falters and survey data suggest firms have started to shed workers, particularly in manufacturing,” economist Claus Vistesen at Pantheon Macroeconomics said to The Wall Street Journal.

Wage growth will end this year at a brisk annual pace of 5.3 percent—too strong to allow inflation to decline to the bank’s 2-percent target rate—but will slow to 3.8 percent in 2025, the ECB has predicted.

The zone’s economy shrank by 0.1 percent in this year’s third quarter under the combined weight of inflation, high interest rates, and a faltering global economy, according to the WSJ.

“We think wage growth will slow in the coming quarters,” Bradley Saunders, an economist at Capital Economics, said to the WSJ. The number of job postings has fallen, including in France and Germany, the zone’s two leading economies, he said.

TREND FORECAST: The Ukraine war, a sagging global economy, and the ECB’s high interest rates give Europe’s economy no strong tools to forge growth.

The region has been on the brink of recession for the past year. The odds favor Europe entering a full-blown recession in this quarter or next, particularly if holiday retail sales are as weak as expected. And should the Israel War escalate and oil price sharply rise, Europe will be hit with Dragflation: Declining economic growth and rising inflation.