The unemployment rate in the euro area reached the highest on record as the festering debt crisis pushed the economy toward a recession, prompting companies to cut jobs.
Unemployment in the economy of the 17 nations using the euro was 11.4 percent in August, the same as in June and July after those months’ figures were revised higher, the European Union’s statistics office in Luxembourg said today. That’s the highest since the data series started in 1995 and in line with median of 30 economists’ forecasts in a Bloomberg News survey.
Europe’s firms are postponing investment decisions and hiring on the back of a looming recession, austerity measures across the region and slowing global growth. The subdued economic outlook has prompted French and German companies including Deutsche Bank AG, PSA Peugeot Citroen and Air France-KLM Group to cut thousands from their payrolls.
“There is simply not enough growth in the euro region to create sufficient jobs and the unemployment rate still has not reached its peak,” Thomas Costerg, an economist at Standard Chartered Bank in London, said before today’s report. “A worrying trend is that the number of unemployed is now also expanding in core countries like Germany, which had been rather sheltered up to now.”
ECB Bond-Purchase Plan
Germany’s unemployment rate remained at 5.5 percent in August, according to today’s report. Germany’s Federal Labor Agency said on Sept. 27 that the number of people without a job rose for a sixth straight month in September. In France, the August jobless rate held at 10.6 percent, while in Spain the rate increased to 25.1 percent, the highest in the euro area, Eurostat said today.
While European Central Bank President Mario Draghi has calmed markets with his government bond-purchase plan, executives and consumers are becoming more pessimistic about the economic slowdown and may keep spending plans on hold.
Economic confidence in the euro area unexpectedly fell in September as governments may find it more difficult to plug their budget gaps after the euro-area economy contracted 0.2 percent in the second quarter and indicators have since shown signs of a deepening slump. Factory output contracted for a 14th straight month in September, Markit Economics said today.
The ECB said last month it expects the euro-area economy to shrink 0.4 percent, down from a previous forecast of a 0.1 percent contraction. It also halved its growth forecast for 2013, to 0.5 percent.
Today’s report showed that 18.2 million people were unemployed in September, up 34,000 from the previous month.
“An end to the horror is not in sight,” said Carsten Brzeski, senior European economist at ING Group in Brussels. “Unemployment rates are still increasing and look set to increase further. It is no longer an exclusive peripheral problem as labor markets in core countries are also weakening. All of this could make unemployment the next big issue of the euro-zone crisis management, making calls for more euro-zone solidarity louder.”