Euro-Area Unemployment Rate Rises to Record: Economy
The euro-area jobless rate climbed to a record in September as the fiscal crisis and tougher austerity measures threatened to deepen the economy’s slump.
Unemployment in the 17-nation region rose to 11.6 percent from 11.5 percent in August, the European Union’s statistics office in Luxembourg said today. That’s the highest since the data series started in 1995. The data also showed that youth unemployment is at 23.3 percent, with Spain’s rate more than double that, at 54.2 percent. A separate report showed inflation cooled to 2.5 percent in October from 2.6 percent.
The debt crisis has pushed at least five euro nations into recessions and eroded investor and business confidence, forcing companies to cut costs to help weather the turmoil. Economic confidence in the region fell in October, according to a report yesterday, while data today French consumer spending rose less than economists forecast in September.
“We’ve become more pessimistic,” said Christoph Weil, an economist at Commerzbank AG in Frankfurt. “The euro-area economy will probably only return to growth in the second quarter of 2013. The situation on the labor market will continue to worsen, with the jobless rate increasing to 12 percent.”
The euro traded at $1.2995 as of 11:33 a.m. in Brussels, up 0.3 percent on the day. The Stoxx Europe 600 Index added 0.3 percent. The gauge is on course for five straight months of gains, the longest winning streak in six years.
Today’s jobless report showed that 18.5 million people were unemployed in the euro area in September, up 146,000 from the previous month. At 25.8 percent, Spain had the highest jobless rate in the currency bloc. Portugal’s unemployment rate was at 15.7 percent, while Ireland reported a jobless rate of 15.1 percent. France’s jobless rate was at 10.8 percent, while Austria had the lowest rate at 4.4 percent.
Job cuts at some of the largest companies in Europe may deepen the economic slump by eroding consumer spending across the euro area. Air France-KLM (AF) Group said today it will seek 1,300 job cuts at its Dutch unit in addition to 5,000 already being eliminated at the larger French business. Deutsche Lufthansa AG, Europe’s second-largest airline, is cutting 3,500 administrative posts and as many as 1,000 in catering.
Fiat SpA (F), the Italian carmaker that controls Chrysler Group LLC, forecast a prolonged downturn in the European market yesterday after reporting a wider loss there. The Turin, Italy- based company also cut revenue and profit goals for 2014.
“Events of the past 12 months have reinforced our negative view of the development of the European markets,” Fiat Chief Executive Officer Sergio Marchionne said. “We see continuing weak trading conditions for the remainder of 2012, extending well into 2013 and at least part of 2014.”
The euro-area economy probably continued to shrink after contracting 0.2 percent in the second quarter, putting it into its first recession since 2009. Economic confidence dropped to the lowest in more than three years in October and manufacturing and service industries contracted. German business confidence also declined this month.
Adding to signs the economic slump is spreading to core nations, French consumer spending rose 0.1 percent in September from the previous month, national statistics office Insee said today. That’s below the 0.2 percent median estimate of economists in a Bloomberg survey.
Joseph Stiglitz, a Nobel-Prize winning economist and professor at Columbia University, said in an interview on Bloomberg Television on Oct. 30 that he’s “very pessimistic” about the prospects of a European recovery.
“Basically Europe has put in place austerity packages that almost inevitably will lead the economy to become weaker, they haven’t put in place anything that will promote economic growth,” he said. “It’s difficult to see what the impetus for real growth in Europe will be.”
Elsewhere, indicators showed that the worst of the declines in Asia-Pacific economies may be moderating. Taiwan’s gross domestic product rose 1.02 percent in the third quarter from a year ago, after a 0.18 percent drop in the previous three-month period. South Korea’s industrial output rose 0.8 percent last month, while Singapore’s unemployment rate in the third quarter dropped to the lowest in 1 1/2 years.
In the U.S., the Institute for Supply Management-Chicago Inc.’s business barometer probably rose to 51 in October from 49.7 in the previous month, according to a Bloomberg survey. A reading above 50 indicates expansion.
The European Central Bank, which has cut borrowing costs to a record low, in September predicted a deeper slump this year than previously estimated, with ECB President Mario Draghi saying earlier this month that risks to the outlook are “on the downside.” The central bank on Sept. 6 also lowered its inflation estimates for this year and next.
Euro-area core inflation, which excludes volatile costs such as energy, held at 1.5 percent in September. The statistics office will release the figure for October next month. The ECB will hold its next rate assessment on Nov. 8.
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