Eurozone jobless rise to highest level in decade

Eurozone jobless rise to highest level in decade
By Stanley Pignal in Brussels
Copyright The Financial Times Limited 2010
Published: June 1 2010 11:49 | Last updated: June 1 2010 11:49
http://www.ft.com/cms/s/0/9c55d4e8-6d61-11df-bde2-00144feabdc0.html


Unemployment continued to rise in the eurozone in April, to 10.1 per cent, the highest level of joblessness in more than a decade.

Policymakers had hoped that unemployment had reached a plateau at March’s 10.0 per cent level, where it had stayed for two months before April’s modest rise.

Unemployment in the 16 countries that use the euro is now at its highest level since before the inception of the European single currency in 1999, according to seasonally-adjusted data from the European Union’s statistical arm.

Youth unemployment breached the 20 per cent mark, up from 19.9 per cent in March. It is now once again above 40 per cent in Spain.

Joblessness is a lagging indicator, and economists warn that it is likely to peak well after the economy starts recovering, probably at a level closer to 10.5 per cent.

But extensive labour market measures used to soften the impact of the downturn – in particular short-work schemes that encouraged companies to cut working hours instead of making employees redundant – may result in erratic recovery in employment levels, economists believe.

However, Germany and the Netherlands, two of the biggest users of such schemes, were the only eurozone economies to experience a fall in unemployment in April.

Furthermore, early data from Germany for the month of May points to a further reduction in joblessness, down 0.1 points to 7.7 per cent, the lowest level since December 2008, according to the Federal Labour Agency.

The Dutch and German reduction highlighted a familiar chasm in recent European economic data, between “core” eurozone economies that are performing well and the so-called “peripheral” economies that continue to struggle.

Portugal, Ireland, Italy and Spain all had rises in unemployment in April – with Greece no longer submitting monthly data for inclusion in the survey. All of these countries, except Italy, are well above the 10 per cent level. France and four other eurozone states were flat.

“The eurozone headline figure masks considerable divergence between member states,” said Martin van Vliet, economist at ING. “The growing divergence is a major complicating factor for the European Central Bank’s ‘one size fits all’ monetary policy, which focuses on average economic conditions in the eurozone.”

Forecasts on unemployment levels in coming months are mixed. Optimists highlight that eurozone businesses now say they are more likely to hire than fire workers, and that the depreciating euro makes it likely that exports – and recruiting – will increase.

Pessimists say economic growth levels are too low to sustain job creation, which will not change until consumer confidence recovers.

Another EU survey out on Tuesday showed that if anything, consumers were getting gloomier because of the euro debt crisis and planned fiscal retrenchment in many countries.