On Friday, Bloomberg reported that factories in Italy have begun to downsize their workforces and the country’s manufacturing sector has continued to shrink.

In August, the EU’s third-largest economy fell to a reading of 45.4 on the Composite Purchasing Manager’s Index (PMI) which was compiled from data by S&P Global. That was significantly below the reading of 50 which separates contraction from expansion, signaling a significant slowdown.

In the past several months, as global demand has weakened, new orders have trailed off, leading to Italian industry and manufacturing struggling to stay afloat.

Tariq Kamal Chaudhry, an economist at Hamburg Commercial Bank, said, “The manufacturing recession, which started mid-last year, continues to stretch out. Once more, overall orders felt the squeeze, mostly due to overseas demand.”

The Italian economy continues to be weighed down by industrial weakness, which has pulled it into a contraction. According to the latest estimates, the nation’s economy shrank by 0.4%, more than the earlier estimate of 0.3% for the three months through June.

Meanwhile, the nation’s labor market is also beginning to falter, according to economists.

In a statement on Friday, S&P Global said, “On the employment front, job losses were recorded for the first time in three years. Several panelists signaled the non-replacement of leavers at their plants.”

Italian unemployment, meanwhile, saw 73,000 jobs lost in July, driving unemployment to 7.6% according to official statistics.