BRUSSELS (Reuters) – Euro zone unemployment rose to its highest level in almost 12 years in April but a drop in the number of jobless in Germany in May signalled the labour market could be stabilising.

The European Union's statistics office said 10.1 percent of the workforce, or 15.860 million people, were jobless in April in the 16 countries using the euro, up from 10.0 percent in March. Unemployment is now at the highest level since June 1998.

"Despite the uptick in the euro area unemployment rate, we view these latest data as being relatively positive," said James Ashley, economist at Barclays Capital.

"The level of unemployment increased by a mere 25,000 month-on-month in April as increases in France, Italy, and Spain were largely counterbalanced by a decline in Germany."

He added: "Although there is widespread divergence in labour market dynamics within the euro area, we continue to expect the overall figures to stabilise over the next few months."

The overall rise in April was fuelled mainly by a 0.2 percentage point rise in unemployment in Spain and Portugal and a 0.1 percentage point rise in Italy.

Unemployment was stable in the euro zone's second-biggest economy, France, and fell 0.2 percentage points in Germany in April.

The latest German data showed it also fell for the 11th month running in May – by a seasonally adjusted 45,000 month-on-month, far more than expected as labour reforms paid dividends and a weaker euro boosted exports.

Unemployment is a lagging indicator, slow to react to the fragile economic recovery now under way.

"April's modest rise of 25,000 in the number of unemployed suggests that a limited pickup in euro zone economic activity since early-2010 is currently helping the labour market," said Howard Archer, economist at IHS Global Insight.

"Meanwhile, labour markets are still benefiting to some extent from government jobs support schemes in a number of Eurozone countries (most notably in Germany)."

But analysts said a turnaround in the labour market was still some way off, forecasting unemployment would remain a drag on the economy.

"High and still rising euro zone unemployment is likely to hold down wage growth and limit the upside for consumer spending for some time to come," Archer said.