Eurozone jobless record
Financial crisis seen taking social toll in December
LONDON: Euro-area jobless data this week will expose the social cost of last year’s debt crisis and recession on southern European economies as unemployment across the region probably rose to a record in December.
Unemployment in the 17-nation bloc climbed for a fifth month to 11.9%, according to the median of 34 economists’s forecasts in a Bloomberg News survey.
That result due on Friday would show the highest jobless rate since records began in 1995. By contrast, German unemployment data the day before may show the jobless rate there held steady for a fourth month at 6.9% in January, a separate survey found.
While measures to stem the region’s debt turmoil have helped reduce sovereign bond yields from Spain to Greece, the recession and crisis have led to job cuts by companies and governments.
The European Central Bank predicts the currency bloc’s economy will shrink 0.3% this year and President Mario Draghi said last week that the “jury is still out” on whether investor optimism could be reflected in economic momentum.
“The worst may be over for financial markets, but definitely not for the real economy,” Marco Valli, chief euro-area economist at UniCredit Global Research in Milan, said by telephone.
“The unemployment situation is going to remain very poor at least for another year, if not longer.”
The euro was trading at US$1.3436 at 9.38 am in Brussels, down 0.2% on the day. The Stoxx Europe 600 Index was little changed at 289.63.
Spanish data last week showed a record 26% of the workforce without jobs in the fourth quarter, bringing to the total close to 6 million people. In Greece, the rate was even higher in October, at 26.8%, also a record.
“Companies are still shedding labour, especially in southern Europe,” Martin Van Vliet, an economist at ING Groep NV in Amsterdam, said in an interview. “Unemployment will probably continue to trend higher in the next couple of months.”
While economists predict the German unemployment rate will stay unchanged, they still see an increase of 8,000 people without work this month from December, according to the median forecast of 31 economists in a Bloomberg news survey.
The euro-area economy has shrunk for two successive quarters and economists predict a further 0.4% decline in gross domestic product in the final three months of last year, according to the median of 26 estimates. The International Monetary Fund last Wednesday cut its global growth forecast and projected a second year of contraction in the euro region.
While investor confidence in Germany, Europe’s largest economy, rose to the highest in 2½ years this month as debt tensions ease, high unemployment and continued austerity measures elsewhere are undermining household sentiment and spending.
An index of euro-area economic confidence probably rose to the highest level since June, according to median estimate of 30 economists.
“We’re in the phase of financial conditions improving and markets becoming more optimistic, but that has to feed through to the real economy,” ING’s Van Vliet said. –