Euro zone jobless rate at new high as recession bites

The euro zone jobless rate rose to a record in October as the fiscal crisis and tougher austerity measures deepened the region’s economic woes.

Unemployment in the 17-nation single-currency bloc increased to 11.7 per cent from 11.6 per cent in September, the European Union’s statistics office in Luxembourg said today.

That’s the highest since the data series started in 1995 and is in line with the median estimate of 34 economists in a Bloomberg News survey. Inflation eased to 2.2 per cent in November, the slowest rate in almost two years, separate data showed.

The euro zone economy has shrunk for two successive quarters, forcing companies to cut costs to help weather the downturn, and economists foresee a further contraction of 0.3 per cent in the fourth quarter, the median of 25 forecasts in a separate Bloomberg survey showed.

The Organisation for Economic Co-operation and Development this week forecast contractions of 0.4 per cent and 0.1 per cent this year and next.

“The trend remains a gradual upward trend before we can hope for some stabilization in the second half of next year,” said Frederik Ducrozet, senior euro-area economist at Credit Agricole in Paris. “There’s no escaping the fact the unemployment rate will rise again in the next year; it’s a lagging indicator.”

The euro was off its session highs against the dollar after the reports.

Friday’s jobless report showed that 18.7 million people were unemployed in the euro area in October, up 173,000 from the previous month. The data also showed that youth unemployment is at 23.9 per cent, with Spain’s rate more than double that, at 55.9 per cent.

At 26.2 per cent, Spain had the highest overall jobless rate in the currency bloc. Portugal’s unemployment rate was 16.3 per cent, while Ireland reported a jobless rate of 14.7 per cent. France’s jobless rate was 10.7 per cent, while Austria had the lowest rate at 4.3 per cent.

Europe’s economic malaise is deepening as governments across the region impose budget cuts to narrow their fiscal deficits. Spain and Cyprus this year joined the list of countries seeking external aid, following Greece, Portugal and Ireland.

Euro-zone finance ministers this week agreed on a package of measures to help reduce Greece’s debt load and prevent its exit from the euro.

Greece had a 25.4 per cent unemployment rate in August, the latest data available. The youth jobless rate was 58 per cent, the EU’s highest, amid a recession now in its fifth year.

Spanish airline Iberia faces a week of strikes in the run-up to Christmas as unions protest job cuts ordered by parent International Consolidated Airlines Group.

IAG plans to shrink Iberia’s fleet and scrap 4,500 jobs, more than one-fifth of the total, as Europe’s third-biggest airline seeks to stem losses that have wiped out earnings from its British Airways brand.