Euro-area unemployment increased to a record in April after the currency bloc’s recession deepened in the first quarter, increasing pressure on its leaders and the European Central Bank to spur economic growth.
The euro-area jobless rate rose to 12.2 percent from 12.1 percent in March, the European Union’s statistics office in Luxembourg said today. That’s in line with the median of 37 economists’ estimates in a Bloomberg News survey. Inflation accelerated in May to 1.4 percent, led by rising prices for food and services, a separate report showed.
“We’re engaged in a race against time, and in too many countries, too many people without a job -- in particular young people -- remind us that the battle is not yet won, and further efforts are needed,” EU President Herman Van Rompuy said this week, adding that he will present proposals for spurring growth and jobs at a June summit of the bloc’s leaders in Brussels.
The economy contracted 0.2 percent in the first three months of the year, extending its recession into a sixth quarter, and is forecast to stagnate in the second quarter before returning to growth.
The contraction has left the ECB to try to mitigate the damage by cutting interest rates and exploring unconventional ways of channeling money to needy companies, especially in the south. The ECB this month lowered its benchmark rate to a record low of 0.5 percent.
The euro extended losses against the dollar after today’s data were released, trading at $1.2989 at 11:37 a.m. in Brussels, down 0.5 percent on the day.
The euro-area inflation rate has been below the ECB’s 2 percent ceiling since February. Energy costs dropped 0.2 percent in May after a 0.4 percent decline a month earlier, today’s report showed. Prices of food, alcohol and tobacco rose 3.3 percent, while the cost of services increased 1.4 percent.
The ECB’s Governing Council will keep its benchmark rate at a record low of 0.5 percent when it meets on June 6, according to the median of 33 economists’ estimates in a Bloomberg survey.
“As long as the ECB’s baseline scenario of some recovery in the second half of the year remains in place, I would be very surprised if they cut rates again over the next couple of months,” said Janet Henry, chief European economist at HSBC Holdings Plc. “They need to see a further deterioration from where we are currently rather than the stabilization they expect to see around the middle of the year.”
The number of jobless people in the euro area rose to 19.38 million in April, up 95,000 from the previous month. Youth unemployment was at 24.4 percent. The jobless rate in Germany, Europe’s largest economy, held at 5.4 percent, while Spain had the highest rate at 26.8 percent. No April data were available for Greece, which had a 27 percent rate in February.
“The euro-region economy simply doesn’t have the momentum to bring the unemployment rate down at the moment,” Jonathan Loynes, chief European economist at Capital Economics Ltd. in London, said by telephone.
Spain’s Gamesa last week said it would dismiss 394 workers at its turbine blade plants in Albacete. Renault SA’s chief operating officer Carlos Tavares said on May 14 that France’s second-largest carmaker expects the European car market to shrink 5 percent this year.
Still, EU leaders meeting in Brussels on May 22 ruled out any stimulus involving cash. “It’s not a matter of money,” German Chancellor Angela Merkel said. “It’s a matter of looking at how to spend this money most productively.”
German retail sales unexpectedly fell for a third month in April as unemployment rose, suggesting the recovery in Europe’s largest economy is struggling to take hold.
In the U.K., the economy will grow through 2015 faster than previously forecast, the British Chambers of Commerce said, as separate data showed consumer confidence increased to a six-month high in May.
The gloomy economic news from the euro zone contrasted with Asia, where Japan’s industrial production rose 1.7 percent in April from March, exceeding the highest estimate in a Bloomberg News survey and helping Prime Minister Shinzo Abe’s economic revival campaign.
In the U.S., consumer spending was probably little changed in April as smaller fuel and utility bills helped Americans shore up savings, economists said before a report today.