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Eurozone unemployment edges higher

Wednesday, 01 December 2010 11:16

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Source: Financial Times
By: Stanley Pignal

Eurozone unemployment edged up in October, dashing policymakers' hopes of an improvement in the labour market before austerity measures take hold across the currency bloc.

The jobless rate reached a record 10.1 per cent, up 0.1 percentage point on revised September figures, according to Eurostat, the European Commission's statistical arm.

Unemployment has been flat in the eurozone since April, and the latest upward tick was larger than expected. However, it is likely to be revised downwards next month as more complete data are compiled.

Economists had been expecting to see a fall in eurozone unemployment in the second half of 2010, but now think it will remain at its current level – the highest since the creation of the single currency in 1999 – for another year.

"October's increased rise in unemployment reinforces our belief that eurozone labour markets are unlikely to see major overall improvement for some time to come so unemployment is likely to remain relatively high," said Howard Archer of IHS Global Insight, a consultancy.

In contrast, separate figures for the German labour market also released on Tuesday showed joblessness in Europe's largest economy continuing to fall.

There had been fears during the downturn that German unemployment would decline slowly – if at all – as its economy recovered, because companies there became avid users of short-work schemes, receiving subsidies for keeping workers on their books.

Instead, its labour market has emerged as one of the healthiest in Europe.

Germany's domestic unemployment indicator dropped to 7.5 per cent, its lowest level in 18 years, highlighting the chasm between Germany's healthy economic prospects and the cloudier picture for the so-called "peripheral" eurozone countries such as Greece and Ireland.

Whereas Germany's unemployment rate is down 0.4 per cent in the past 12 months, joblessness has risen 1.7 per cent in Spain, where it stands at 20.7 per cent.

Compared with September, French unemployment was down 0.1 per cent to 9.8 per cent. Italy's data moved the most, with a rise of 0.3 percentage points to 8.6 per cent.

Policymakers are keeping a close eye on unemployment figures as a gauge of likely consumer spending over the Christmas season.

Though the news is mixed at eurozone level, the prospect of higher spending in Germany could be more important in boosting the bloc's economy.

"Combined with a general feelgood factor, German consumers seem set to finally spend their way out of the recession during the Christmas shopping season. The interplay between further domestic business investment and employment growth should carry the positive consumption momentum into next year," said Carsten Brzeski at ING.

Copyright The Financial Times Limited 2010. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.

By Stanley Pignal in Brussels Eurozone unemployment edged up in October, dashing policymakers’ hopes of an improvement in the labour market before austerity measures take hold across the currency bloc. The jobless rate reached a record 10.1 per cent, up 0.1 percentage point on revised September figures, according to Eurostat, the European Commission’s statistical arm. Unemployment has been flat in the eurozone since April, and the latest upward tick was larger than expected. However, it is likely to be revised downwards next month as more complete data are compiled. Economists had been expecting to see a fall in eurozone unemployment in the second half of 2010, but now think it will remain at its current level – the highest since the creation of the single currency in 1999 – for another year. “October’s increased rise in unemployment reinforces our belief that eurozone labour markets are unlikely to see major overall improvement for some time to come so unemployment is likely to remain relatively high,” said Howard Archer of IHS Global Insight, a consultancy. In contrast, separate figures for the German labour market also released on Tuesday showed joblessness in Europe’s largest economy continuing to fall. There had been fears during the downturn that German unemployment would decline slowly – if at all – as its economy recovered, because companies there became avid users of short-work schemes, receiving subsidies for keeping workers on their books. Instead, its labour market has emerged as one of the healthiest in Europe. Germany’s domestic unemployment indicator dropped to 7.5 per cent, its lowest level in 18 years, highlighting the chasm between Germany’s healthy economic prospects and the cloudier picture for the so-called “peripheral” eurozone countries such as Greece and Ireland. Whereas Germany’s unemployment rate is down 0.4 per cent in the past 12 months, joblessness has risen 1.7 per cent in Spain, where it stands at 20.7 per cent. Compared with September, French unemployment was down 0.1 per cent to 9.8 per cent. Italy’s data moved the most, with a rise of 0.3 percentage points to 8.6 per cent. Policymakers are keeping a close eye on unemployment figures as a gauge of likely consumer spending over the Christmas season. Though the news is mixed at eurozone level, the prospect of higher spending in Germany could be more important in boosting the bloc’s economy. “Combined with a general feelgood factor, German consumers seem set to finally spend their way out of the recession during the Christmas shopping season. The interplay between further domestic business investment and employment growth should carry the positive consumption momentum into next year,” said Carsten Brzeski at ING. Copyright The Financial Times Limited 2010. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.