Euro-Region Unemployment Surges to 14-Year High, Nears Record
Euro-region unemployment rose to the highest in more than 14 years and manufacturing contracted for an eighth month, adding to signs the economy probably slipped into a recession in the first quarter.
The jobless rate in the 17-nation euro area rose to 10.8 percent in February from 10.7 percent a month earlier, the European Union’s statistics office in Luxembourg said today. That’s the highest since June 1997 and close to the record of 10.9 percent. A manufacturing gauge, based on a survey of purchasing managers, fell to 47.7 in March from 49, Markit Economics said.
“Unemployment is lagging economic developments and the situation on the labor market will likely remain difficult through 2012,” said Jens Kramer, an economist at NordLB in Hanover, Germany. “Domestic demand is hurt by the difficult labor market and tougher austerity measures. The first and second quarters will show a contraction followed by a slight recovery.”
Europe’s economy has been mired in a fiscal crisis for more than two years, forcing companies to cut jobs and pushing economies from Spain to Ireland into recessions. While leaders awarded Greece a second aid package last month to help restore confidence, economic sentiment unexpectedly dropped in March. The European Commission forecasts the euro-area economy to shrink 0.3 percent this year.
To help contain the crisis, European finance ministers decided last week to boost the region’s rescue-lending capacity to 800 billion euros ($1.1 trillion), a figure that includes 300 billion euros already committed to Greece, Ireland and Portugal. European Central Bank council member Ewald Nowotny told Bloomberg News on March 30 that the firewall is “sufficient.”
The euro was little changed after today’s data were released, trading at $1.3350 at 11:28 a.m. in Frankfurt, up less than 0.1 percent.
In Germany, Europe’s largest economy, the jobless rate held at 5.7 percent in February based on a trend component, according to today’s report, while unemployment in France remained at 10 percent. In Italy, the jobless rate rose to 9.3 percent from 9.1 percent based on provisional data. Spain had the highest rate at 23.6 percent. No data were available for Greece.
In the 27-nation EU, the jobless rate rose to 10.2 percent in February from 10.1 percent the previous month. About 17.13 million people in the euro area were unemployed in February, up 162,000 from the previous month.
Markit’s euro-area manufacturing gauge dropped to a three- month low in March. A German indicator fell to 48.4 from 50.2 the previous month, while in France the number slipped to 46.7 from 50.
“There were further signs that the manufacturing malaise already exhibited at the periphery of the currency bloc was spreading to the core,” Markit said in today’s report. “Demand was weaker in both domestic and export markets.”
In the U.K., a manufacturing gauge rose to 52.1 from a revised 51.5 in February, Markit said. Sentiment among Japan’s largest manufacturers failed to improve in March, with the quarterly Tankan index remaining at minus 4, according to the Bank of Japan in Tokyo.
China’s Purchasing Managers’ Index rose to a one-year high of 53.1 in March, while a PMI from HSBC Holdings Plc (HSBA) and Markit Economics showed manufacturing contracting and export orders falling, according to reports released on April 1.
With economies around the globe faltering and rising energy costs sapping their spending power, companies may continue to cut jobs. An indicator of new orders declined at a faster pace in March than in the previous month, with a gauge of employment falling for a second month, Markit said.
“The prospects for April also look poor, with companies reporting steeper rates of decline for both new orders and backlogs of work,” Chris Williamson, chief economist at Markit, said in the statement. “At the same time firms saw their production costs rise sharply, largely as a result of high oil prices.”
The Frankfurt-based central bank will probably keep its benchmark interest rate at 1 percent, matching a record low, when council members meet on April 4, according to a Bloomberg survey. The ECB has offered banks three-year loans and purchased government bonds to help contain the fiscal crisis.
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