Euro zone May jobless hits 10-year high of 9.5 pct

By Dale Hudson

BRUSSELS (Reuters) - Euro zone unemployment hit its highest level in 10 years in May, data showed on Thursday, bolstering market expectations the European Central Bank will leave interest rates at record lows for now.

The unemployment rate in the 16-nation euro zone rose to 9.5 percent from April's 9.3 percent as 273,000 people lost their jobs in the month, bringing the number of those out of work to 15.013 million, European Union statistics office Eurostat said.

"For the euro area this is the highest rate since May 1999," Eurostat said of a figure higher than the 9.4 percent expected by economists polled by Reuters, and which augured badly for any quick exit from the worst recession since World War Two.

Eurostat calculated that 3.4 million people in the currency zone lost their job in the year from May 2008, when joblessness had stood at 7.4 percent.

Some 5.1 million joined jobless queues across the 27-nation EU in the 12 months from May 2008, when EU unemployment was just 6.8 percent.

The data came as the European Central Bank was meeting in Luxembourg, with economists expecting it to leave its main interest rate on hold at 1.0 percent, a record low.

"(This) demonstrates that the 'green shoots of recovery' are not yet showing up in the labour market," ING economist Martin van Vliet said.

Van Vliet said the data argued against expectations among some in the market that the ECB would start raising rates early next year. The previous rate-hiking cycle did not start until months after unemployment had begun to fall, he said.