Euro-zone unemployment jumps to record 11.8pc
Official data Friday painted a far from encouraging picture of the European economy, with unemployment running at record and “unacceptable” highs in the euro zone while inflation fell sharply, highlighting the weakness of consumer demand.
Separately, a closely followed manufacturing survey showed the euro zone remained in the doldrums for a 19th consecutive month in February, although it also noted some signs of increased export demand – a key growth driver.
The Markit Eurozone Manufacturing Purchasing Managers Index was 47.9 points in February, unchanged from January when it hit an 11-month high, albeit one still below the 50-points boom-bust line.
The Eurostat data agency said unemployment in the 17-nation eurozone rose to a record 11.9 per cent in January from 11.8 per cent in December, with nearly 19 million people out of work.
That outcome makes uncomfortable reading, coming in so close already to the official forecast of 12.2 per cent unemployment for this year and with the debt-laden euro zone not expected to return to growth until next year.
Eurostat said that compared with December, some 201,000 joined the jobless queues in the euro zone in January and 222,000 in the 27-nation EU.
These figures are “unacceptable ... (they are) a tragedy for Europe,” said a spokesman for EU Employment Commissioner Laszlo Andor.
Martin van Vliet at ING Bank said the data marked a “sharp acceleration from December” and meant that “an end to the labour market downturn is not yet in sight.
“Even if the eurozone economy exits from recession in due course, the labour market is likely to remain in recession for most if not all of this year,” van Vliet said.
“It still looks highly probable that the eurozone unemployment rate will move well above 12 per cent during this year and could very well near 12.5 per cent,” warned Howard Archer of IHS Global.
In the EU the unemployment rate edged up to 10.8 per cent from 10.7 per cent in December, with 26.2 million jobless.
The highest jobless rates were in bailed-out Greece, at 27 per cent – although this figure is for November – and in struggling Spain, on 26.2 per cent.
The lowest rates were Austria with 4.9 per cent, and Germany and Luxembourg, both on 5.3 per cent.
In January last year, euro-zone unemployment was 10.8 per cent and the EU 10.1 per cent, highlighting how the debt crisis and economic slump have hit the jobless numbers, especially among the under-25s.
Euro-zone youth unemployment was put at 24.2 per cent in January, up from 21.9 per cent in January last year. In the EU, under-25 unemployment rose to 23.6 per cent from 22.4 per cent.
For Greece, the youth unemployment rate in January was given as 59.4 per cent, with Spain on 55.5 per cent and Italy 38.7 per cent.
On the eurozone inflation front, Eurostat said the rate of price increases fell to 1.8 per cent in February, putting it well below the European Central Bank’s target rate for the first time in more than two years.
In January, the inflation rate was 2.0 per cent. The last time inflation was below this level was in November 2010 when it hit 1.9 per cent. The ECB, whose first responsibility is price stability, has a long-term inflation target of close to but below 2.0 per cent.
Low inflation would normally be seen as a positive, meaning price pressures are contained, but it also reflects the state of consumer demand which inevitably suffers at times of high unemployment when people worry about job security and prefer to save their money rather than spend it.
Global Economics analysts said the jobs figures “suggest that wage growth is set to weaken from already low rates of around 2.5 per cent.”
That may be good for inflation but it will also “add to the downward pressure on consumer spending from fiscal austerity,” they wrote in a note.
On the PMI report, Markit chief economist Chris Williamson said there was “some consolation” in the fact that February at least held steady with January, suggesting the pace of the downturn has eased.
“While the manufacturing sector is likely to have again acted as a drag on the overall economy in the first quarter, causing GDP to fall for a fourth consecutive quarter, there are signs that the downturn has become less severe,” Williamson said.