Euro-Area Unemployment at 12.1% Shows Economic StrugglesStefan Riecher
Euro-area unemployment held at a record in November as policy makers struggled to bolster the recovery from the currency bloc’s longest recession.
The jobless rate remained at 12.1 percent, the European Union’s statistics office in Luxembourg said today. That’s in line with the median estimate in a Bloomberg News survey of 26 economists. After several revisions of previous months’ data, unemployment has been stable at that level since April.
While unemployment remains resistant to policy makers’ attempts to boost the economy, positive signs are gradually accumulating. Separate data today showed euro-area retail sales and German factory orders rose more than forecast in November, while data tomorrow may show economic confidence in the currency bloc improved in December.
There is “very limited momentum in the euro area labor market,” said Timo del Carpio, an economist at RBC Capital Markets in London. “Despite gradually improving macro conditions, the pace of recovery in our view falls short of that necessary to make a measurable dent in unemployment.”
Euro-region retail sales increased 1.4 percent in November from the previous month, beating analysts’ estimates and rebounding from two months of declines. From a year earlier, sales were up 1.6 percent. In Germany, manufacturing orders surged 2.1 percent in November, also ahead of forecasts.
The euro declined against the dollar today and was down 0.2 percent at $1.3584 as of 11:22 a.m. London time.
Europe’s fragile labor market remains a major concern for EU leaders as they try to foster the recovery. Last month, they acknowledged that the jobless rate remains “unacceptably high,” especially among young people, 18 months after they unveiled a 120 billion-euro ($163 billion) package to jump-start the economy and create jobs.
“The labor market is lagging behind the economic recovery in the euro area,” Carsten Brzeski, an economist at ING Group NV in Brussels, said by telephone. “It will take at least until the middle of the year until we’ll see significant improvement.”
The European Central Bank estimates that the euro-area economy will expand 1.1 percent this year after contracting 0.4 percent in 2013. Unemployment will average 12.1 percent this year and 11.8 percent in 2015, economists forecast in a separate Bloomberg survey.
The ECB, after cutting its main refinancing rate to a record-low 0.25 percent in November, sees ‘‘no immediate need to act’’ further on “encouraging signs” that the euro area’s crisis is easing, President Mario Draghi said on Dec. 28 in an interview published in Der Spiegel. December inflation slowed to 0.8 percent, and the rate has been below the ECB’s 2 percent ceiling for 11 months.
The Frankfurt-based central bank will leave its key rate unchanged tomorrow, according to all 51 economists in another Bloomberg survey.
“The weak underlying price pressures and low inflation rate provide strong arguments in favor of further easing at tomorrow’s ECB meeting,” said Martin van Vliet, an economist at ING Bank in Amsterdam.
“However, the ongoing signs of economic recovery will likely keep the ECB on the sidelines, with the hawks arguing that the recovery will eventually lead to a pick-up in price pressures,” he said.
Meager growth has prompted European companies to shed jobs in a bid to cut costs and remain competitive. European Aeronautic, Defence and Space Co. said last month that it would cut 5,800 jobs in Germany, France, Spain and the U.K.
Unemployment varied widely across the euro area in November, from a low of 4.8 percent in Austria to a high of 26.7 percent in Spain. Greece, which last reported in September, had a jobless rate of 27.4 percent. Among people under the age of 25, unemployment in the then 17-nation euro zone stood at 24.2 percent.
European bonds extended gains from yesterday when they rallied as Ireland raised 3.75 billion euros ($5.09 billion) in a debt sale, returning to markets after exiting an international bailout. Spain released its borrowing strategy for 2014 today,
Spanish government bonds rose for a second day today, pushing the 10-year yield to the lowest level since 2009. Portugal’s 10-year debt advanced for a fifth day.
In addition to retail sales, EU leaders can point to improving economic confidence as they seek evidence of a strengthening recovery. The European Commission will publish the results of its December survey tomorrow, with the gauge forecast to rise to 99.1, the highest reading since July 2011, according to economists surveyed by Bloomberg.