Jobless Rate in Euro Zone Stays at Record
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Version 0 of 1. FRANKFURT — The economic recovery in the euro zone is feeble. Employment continues to suffer. And the patient is likely to be getting around on crutches for months if not years to come. That was essentially the prognosis from two key economic indicators published Thursday and from economists assessing the latest conditions. The number of people out of work in the countries using the euro currency rose slightly in September, while inflation fell more than expected — both signs of a weak economy. Neither indicator necessarily contradicts other more positive economic news recently, notably an end to the recession in Spain. But the data, which showed euro zone unemployment stuck at a record high of 12.2 percent and inflation at its lowest level in four years, served as a reminder that a long convalescence lies ahead for Europe. “It doesn’t mean we’re back in recession,” Marie Diron, an economist who advises the consulting firm Ernst & Young, said of the jobs number. “It’s consistent with growth, but weak growth.” The unemployment rate is an especially critical economic indicator in Europe. Years of austerity and joblessness have fed radical political parties and strained democracy throughout the euro zone. The longer that record unemployment persists, the harder it will be for political leaders to contain discontent and push through changes in labor regulations and other rules that are needed for the region to grow more strongly. “This is a race against time,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, a consultancy. “Can these economies recover fast enough before an anti-Europe backlash brings down the single currency project?” The jobs and inflation numbers, reported Thursday by Eurostat, the European Union statistics agency in Luxembourg, could have a sobering effect on investors who have been bullish on Europe lately. Germany’s benchmark DAX index, which has risen 24 percent in the last year, was little changed Thursday. The euro, which was at a two-year high against the dollar at the beginning of the week, fell more than a cent to $1.36. The jobless rate was the same as August’s, which was revised up to 12.2 percent from 12 percent. But the absolute number of jobless people in the 17 countries in the euro area rose by 60,000 to a total of about 19.5 million, according to Eurostat. Employment often takes a long time to respond in an upturn. Ms. Diron, the Ernst & Young adviser, said it could be six months or more before euro zone unemployment started to fall, because companies first try to extract more production out of existing employees before they hire new ones. Companies “need stronger evidence this is not something that will peter out, especially in Europe, where the costs of hiring and firing are pretty high,” she said. The numbers come as a disappointment after recent data fed hopes that the euro zone was slowly emerging from a downturn that effectively began in 2009. Spain, one of the countries hit hardest by the euro zone debt crisis, returned to growth in the third quarter after a recession that lasted more than two years. There have also been signs that the European car industry, a major source of jobs, is recovering from its worst sales in two decades. On Wednesday, the Italian carmaker Fiat reported its first increase in European sales since 2010. The euro zone as a whole emerged from recession in the second quarter, but the rebound was weak and output in the region was still lower than it was in 2008. Economists have been watching for any signs that the economic upswing has staying power. There remains a huge gulf between economic performance in Austria and Germany, which had the lowest unemployment rates, and Greece and Spain, which had the highest. Unemployment in Austria was unchanged at 4.9 percent in September, and in Germany the rate fell to 5.2 percent from 5.3 percent. The jobless rate in Greece was 27.6 percent in July — the most recent month reported by that country’s statisticians — up from 27.5 percent in June, Thursday’s data showed. In Spain, the unemployment rate was unchanged in September at 26.6 percent. In both countries, unemployment among younger people is well above 50 percent. Argyro Athanassiou, 24, has struggled to find steady work since she graduated from Athens University with a degree in economics more than two years ago. “I did some baby-sitting for some friends of my parents who felt sorry for me,” she said Thursday in a cafe near central Athens. “I have a box full of job applications that went nowhere. I look at it and wonder what I might have been if this crisis hadn’t happened.” Thanassis Stamatopoulos, 46, said he had been looking for work since the spring of last year when he was laid off from his job as a salesman for an electronics products retailer. “Firms are getting rid of people; no one’s hiring,” said Mr. Stamatopoulos, who added that he had asked his local bakery for work last week but was rejected. Joblessness also continued to rise in France and Italy, which have the second- and third-largest economies in the euro zone, after Germany. Unemployment in France rose to 11.1 percent in September from 11 percent in August, while in Italy the rate increased to 12.5 percent from 12.4 percent. “Italy is the sick man of Europe; France is a close second,” Mr. Spiro said, adding that he remains deeply pessimistic about the chances for recovery. He pointed out that Europeans were still crawling out from under a huge pile of debt, which acts as a dead weight on the economy. “It’s difficult to see how these economies are going to be able meaningfully to grow when you have these kinds of headwinds,” Mr. Spiro said. The consulting firm PricewaterhouseCoopers estimated this week that the stock of bad loans in Europe had risen by almost 100 billion euros, or $136 billion, during the last year, to €1.2 trillion. The inflation numbers for October showed the estimated annual rate of inflation slowing to 0.7 percent from 1.1 percent in September. That was the slowest increase since November 2009 in the prices that people and businesses pay for everything, including food, energy and industrial goods. The jobs and inflation reports could put pressure on the European Central Bank to take action when it meets next week. The E.C.B. aims to maintain inflation at about 2 percent, a level considered healthy for growth. In theory, the decline in inflation means that the central bank should be obligated to cut the benchmark interest rate to 0.25 percent from its current level of 0.5 percent, which is already a record low. The data Thursday prompted economists at UBS to predict that the European Central Bank would do just that. That remains a minority view, though. Some analysts said the E.C.B. should start to worry about the risk of deflation, a broad fall in prices that would be crippling for Europe because national governments would collect less revenue from sales taxes and other sources and have even more trouble repaying their debts. But others said the slowing rate of inflation was a reflection of wage cuts in Greece and Spain, which will help those countries become more competitive on world markets. “Declining prices in Greece and Spain confirm that companies are using the drop in unit labor costs to improve their price competitiveness,” Christoph Weil, an economist at Commerzbank, said in a note to clients. For all 28 countries in the European Union, including those like Romania and Britain that are not in the euro zone, the unemployment rate was unchanged at 11 percent for the fourth month in a row. <NYT_AUTHOR_ID> <p>Niki Kitsantonis contributed reporting from Athens. |