Euro Jobless Record Not Whole Story as Italians Give Up

Euro-area data this week will probably show the region ended 2013 with a record jobless rate that reveals only part of the social legacy of the debt crisis.

While economists predict unemployment in December stayed at an all-time high of 12.1 percent, with about 19 million jobless, that tally excludes legions of adults who would also work if they could. Bloomberg calculations for the third quarter show a wider total of 31.2 million people of all ages are either looking for jobs, willing to do so though unavailable, or else have given up.

Giuseppe Di Gilio, 30, is one of 4.2 million such people who don’t appear in Italy’s unemployment statistics. The most recent so-called labor underutilization rate in the third-biggest economy in the euro area was 24 percent, more than double the official jobless rate.

“I don’t want to work myself to death to survive,” said Di Gilio, who has a bachelor’s degree in electronic engineering and lives with his parents in a town near Naples. He hasn’t sent a single resume since abandoning his postgraduate studies in July because he says the jobs out there wouldn’t allow him to earn a living.

“My friends who do work still need their parents’ support and those who start working often don’t get paid,” he said.

Youth Unemployment

Italy’s statistics agency, Istat, will release labor market data at 10 a.m. local time on Jan. 31, an hour before the European Union’s counterpart in Luxembourg publishes its jobs report on the euro region. Italian unemployment reached a record 12.7 percent in November.

European stocks fell for a third day, sending the Stoxx Europe 600 Index down 0.8 percent to its lowest level in more than a month. The euro was little changed against the dollar at $1.3677 at 5:52 p.m. in Rome.

While the euro area exited its longest-ever recession last year and economic confidence is improving, almost a quarter of the region’s young labor force is looking for work.

“The problem is jobs, jobs, jobs,” Angel Gurria, secretary general of the Organization for Economic Cooperation and Development, said in an interview in Davos, Switzerland, last week. “There is nothing politically more explosive, more dangerous and more destabilizing than having a whole generation of young people being very frustrated.”

Situation Worse

The euro area’s official unemployment rate includes only those who actively sought work in the previous four weeks and are available to start within the next two weeks. The labor underutilization rate compiled by Bloomberg using Eurostat data for the third quarter includes the official unemployed as well as those willing to work who have given up looking for a job or are not immediately available.

Among euro-zone countries, Italy has the largest group of potential workers who don’t appear on official unemployment statistics. The gap between the country’s labor underutilization rate, encompassing people between the ages of 15 and 74, and its unemployment rate is more than twice that of Spain and more than five times that of Greece.

“The situation in the region, and in Italy in particular, is certainly worse than it seems at first glance,” Raffaella Tenconi, an economist at Bank of America Merrill Lynch in London, said by telephone. “This is particularly evident when you look at youth unemployment and participation rates.”

In Di Gilio’s home province of Naples the local youth unemployment rate in 2012 was 53.6 percent compared to a national average of 35.3 percent.

‘Hope Lost’

Looking for work “would be worth it if I had the chance to improve my lifestyle, buy a house, start a family,” Di Gilio said. Italian Labor Minister Enrico Giovannini told RaiNews in an interview last week that he’s concerned about the number of young people who don’t study, are not employed and are not seeking work. “They are fresh resources who have lost hope,” he said.

Over 12 percent of workers in Italy aren’t able to live on their salaries alone, according to an EU study published this month. That’s the highest percentage after Romania and Greece. Italy is also one of the worst countries in which to lose a job, since the percentage of people able to find other employment within a year is between 14 percent and 15 percent, the lowest in Europe.

The labor underutilization rate excludes temporary layoffs and involuntary part-time workers. The gauge also doesn’t take into account around 10.1 million women who don’t want a job and are not included in the workforce.

“It pays off for women to stay at home,” also because of the lack of child-care services, Bank of America’s Tenconi said.

Family Networks

Italy’s female employment rate in 2012 was 47.1 percent, the lowest in the EU after Greece, Malta and Croatia, and below the region’s 58.5 percent average.

The strength of family networks, which allow income sharing in tough economic times, also works as a disincentive to seeking low paid jobs. That’s particularly true for many women and young people who find it more viable to stay at home.

“In some countries if you don’t work you can’t make ends meet,” said Giuseppe Ragusa, assistant professor of economics at Luiss University in Rome. “In Italy thanks to parental networks young people who are offered work at 400 euros a month can decide to stay at home with their parents and still have a decent life.”

European Central Bank President Mario Draghi said in a newspaper interview last week that euro-region unemployment is “still very high” and called for structural reforms.

In Italy, that remains a challenge after coalition squabbling hampered further measures last year.

“Italy has lagged a lot on the reforms agenda and now finds itself with more homework to do,” said Alberto Gallo, head of European macro-credit at Royal Bank of Scotland Group Plc in London.

Before it's here, it's on the Bloomberg Terminal.