Swiss unemployment held at the highest level in two years in March, indicating that the economy remains vulnerable to the strong franc.
The jobless rate, adjusted for seasonal swings, was unchanged at 3.1 percent, the State Secretariat for Economic Affairs in Bern said in an e-mailed statement today. That’s in line with the median estimate of 12 economists in a Bloomberg News survey. The unadjusted jobless rate fell to 3.2 percent from 3.4 percent.
Switzerland has managed to escape the slump that has befallen the 17-nation currency bloc, thanks in part to a cap of 1.20 per euro on the franc set by the Swiss National Bank in September 2011. The central bank cited the need to shield the economy from deflation and a recession for the move.
Swiss consumer prices declined for an 18th month in March, falling 0.6 percent from a year earlier, the Federal Statistics Office said today. That’s the longest stretch since at least 1971, according to data compiled by Bloomberg.
“This continues a trend of downward pressure on prices since 2008 and indicates that the SNB policy of minimum exchange rates is justified,” Peter Rosenstreich, chief foreign-exchange analyst at Swissquote Bank, said in a note to clients.
The euro area, Switzerland’s biggest trading partner, has contracted for five straight quarters and that trend is forecast to have continued in the first three months of this year. Unemployment in the bloc hit a record 12 percent in February.
Investors like to buy francs at times of high uncertainty, which pushed the currency close to parity with the euro in August 2011.
The franc weakened against the euro in the second half of 2012 after the European Central Bank pledged to buy the bonds of member states. February’s inconclusive election in Italy and last month’s bailout of Cyprus reversed some of the euro’s appreciation against the franc.
The Swiss currency fell as much as 0.3 percent against the euro today and was trading at 1.2196 at 11:39 a.m. in Zurich. Against the dollar it was at 93.55 centimes.
“The proximity and safety of Switzerland makes the country the ideal location for European investors,” Rosenstreich said.
The SNB expects Switzerland’s output to grow as much as 1.5 percent this year. Still, the economy may struggle to pick up speed in coming months as uncertainty about Europe’s public finances dented Swiss investor confidence in March.
The tourism sector as well as machine makers are among the companies that have suffered most due to the strong franc. Rieter Holding AG, a Swiss maker of textile machinery, said on March 21 that it plans to cut 5 percent of its 4,720 staff over the next 24 months, with most reductions planned for Switzerland.
The number of job openings in the Alpine nation declined by 13 to 16,022 in March, today’s report showed. A total of 194,224 people were looking for a job, 6,271 fewer than in the previous month.