Euro Jobless Rate Seen at Record Even as Recession Ends
Euro-region unemployment probably stayed at a record high in June even as the economy emerged from the longest recession since the single currency’s creation, economists said.
The jobless rate remained at 12.2 percent last month, according to the median of 36 forecasts in a Bloomberg News survey. That would match the result for May, which was the highest since records began. Eurostat, the European Union’s Luxembourg-based statistics office, will publish the data tomorrow at 11 a.m.
The 17-nation euro economy is showing signs of emerging from its recession and resuming growth after manufacturing output unexpectedly expanded in July for the first time in two years and German business confidence improved for a third month. Unemployment will still continue to rise in the coming quarters, according to a separate survey.
“There is scope for a further moderate increase in the unemployment rate, because unemployment lags behind growth by one to two quarters,” said Marco Valli, chief euro-zone economist at UniCredit Global Research in Milan. “Given the economy is already stabilizing and will resume modest growth in the third quarter, we may see some stabilization in unemployment toward the end of the year.”
Daimler AG (DAI), the world’s third-largest maker of luxury vehicles, forecast significant gains in second-half earnings on July 24 as the western European auto market bottoms out and new models spur demand. At the same time, Michelin & Cie (ML), Europe’s largest tiremaker, said on June 10 that it would end production of heavy-truck tires at a factory in Joue-les-Tours, about 250 kilometers (155 miles) southwest of Paris, by the end of 2015. About 730 of the plant’s 930 employees will lose their jobs.
Volkswagen’s Seat unit said last week it reached an agreement with unions in Spain to cut working hours in order to adjust output to market conditions without firing staff. The automobile maker said workers may avoid pay cuts if they opt for training entitling them to unemployment benefits.
Spanish unemployment dropped in the second quarter for the first time since 2011. That’s lending support to Prime Minister Mariano Rajoy’s prediction of an economic recovery later this year. At 26.3 percent, the rate is still among the highest in the euro area.
German inflation unexpectedly remained unchanged at 1.9 percent in July. Economists predicted a slowdown to 1.8 percent, according to a separate survey. Prices rose 0.4 percent from June.
Spain’s recession eased in the second quarter, with gross domestic product falling 0.1 percent from the first quarter when it declined 0.5 percent, the country’s National Statistics Institute said today, matching a July 23 Bank of Spain estimate. Inflation in July was 1.8 percent, INE also said.
Economic confidence in the euro area improved for a third month in July, the European Commission in Brussels said today. An index of executive and consumer sentiment rose to 92.5 from 91.3 in June, matching the median estimate in a Bloomberg News survey of 31 economists.
Euro-area unemployment will keep rising to 12.4 percent in the fourth quarter and average 12.3 percent next year, according to the Bloomberg monthly survey of economists. The economy, which has contracted for a record six quarters, probably stagnated in the three months through June and will return to growth this quarter, the survey shows.
European Central Bank President Mario Draghi is banking on a recovery “later in the year and in 2014,” according to his July 4 policy statement. He pledged to keep interest rates low for an extended period of time amid low inflation, a subdued economic outlook and “weaker and weaker” credit flows.
The Frankfurt-based institution in June predicted the economy will contract 0.6 percent this year before growing 1.1 percent next. The Governing Council will convene in Frankfurt on Aug. 1 for its monthly policy meeting.
“I still have a fairly pessimistic view,” said Anatoli Annenkov, senior economist at Societe Generale SA in London. “Unemployment will take some time to recover. Germany is doing very well, but we still have big numbers in southern Europe.”
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