Euro-area unemployment reached the highest on record as a deepening economic slump and budget cuts prompted companies from Spain to Italy to reduce their workforces.
The jobless rate in the 17-nation euro area rose to 11.1 percent in May from 11 percent in April, the European Union’s statistics office in Luxembourg said today. That’s the highest since the data series started in 1995.
Europe’s companies are under pressure to lower costs to protect earnings as the worsening fiscal crisis erodes exports and consumer spending. Companies including Deutsche Lufthansa AG, PSA Peugeot Citroen and Spanish news agency Efe are seeking to eliminate jobs to cope with flagging demand.
“The overall picture is worrying, as problems in the real economy are being compounded by problems in financial markets,” said Mark Miller, an economist at Capital Economics Ltd. in London. “The tone of the business surveys has been pretty downbeat of late, suggesting that labor market conditions may deteriorates for some time yet. It’s very difficult to see an immediate end to this.”
In the euro area, 17.561 million people were unemployed in May, an increase of 88,000 from the previous month, today’s report showed.
Spain’s unemployment rate, highest in the European Union, increased to 24.6 percent in May from 24.3 percent a month earlier.
Air France-KLM Group, Europe’s largest carrier, said on June 21 it plans to eliminate more than 5,000 jobs from its French workforce as it seeks a return to profitability. In Spain, state-owned news agency Efe said on June 8 it may eliminate 275 jobs, about a fifth of its workforce, after subsidies were cut and it lost customers.
Euro-area officials are fighting to prevent the sovereign debt crisis from spreading and took additional measures to bolster growth amid concern of a global slump. European Union leaders at a June 28-June 29 summit approved a 120 billion-euro ($149 billion) plan to promote growth in the 27-nation bloc that includes a capital boost for the European Investment Bank.
Economists expect the European Central Bank on July 5 to lower its benchmark interest rate by at least 25 basis points to a record low of 0.75 percent, according to the median of 57 estimates in a Bloomberg survey, as a worsening economic outlook dampens price pressures.