February 7, 2023

Euro Zone Joblessness Rises

FRANKFURT — Unemployment in the euro zone continued its steady rise in May, according to data published Monday, underscoring the human effects of a downturn that has lasted a year and a half.

The jobless rate in the 17 countries that belong to the euro zone was 12.1 percent in May, adjusting for seasonal effects, the report from Eurostat, the European Union statistics agency, said. That figure compared with 12 percent in April, which was revised down from 12.2 percent reported earlier. Based on the revised figures, May unemployment was a record high.

Eurostat estimated that 19.2 million people in the euro area were jobless in May, an increase of 67,000 from April. For all 27 countries in the European Union, the unemployment rate was unchanged at 10.9 percent. The European bloc expanded to 28 countries on Monday when Croatia officially joined.

Joblessness in the euro zone has been rising almost without interruption since early 2008, when the financial crisis began, declining only briefly at the beginning of 2011, and analysts see little prospect for a sustained decline anytime soon.

While economists expect the euro zone economy to stabilize in the course of this year after a recession that has lasted a year and a half, growth will likely remain too slow to generate large numbers of jobs.

Nor is there much hope of government policies that would stimulate growth. European leaders agreed last week on a plan to combat youth unemployment, which rose to 23.8 percent in May in the euro zone from 23 percent a year earlier. The youth jobs plan calls for accelerated spending of 6 billion euros, or $7.8 billion, a sum that some analysts said was too small to make a big dent in the problem. On Wednesday, the German chancellor, Angela Merkel, will host other European leaders at a conference in Berlin on youth employment.

Economists said, however, that such efforts did not address the underlying cause of unemployment, namely a prolonged recession and a lack of credit in the most troubled countries. Political leaders have been reluctant to share the cost of recapitalizing weak banks or take other measures that would allow lending to resume.

“The measure that offers the greatest potential for job creation in the short to medium term is an easing of credit conditions,” Marie Diron, an economist who advised the consulting firm Ernst Young, said in a statement. “This would allow companies to invest and as a result recruit in the euro zone.”

The European Central Bank will hold its monetary policy meeting on Thursday, but it is not expected to introduce more stimulus to the euro zone economy. A cut in the benchmark interest rate, to 0.25 percent from a record low of 0.5 percent, is possible, but many say it would be unlikely to do much to encourage lending in troubled countries like Spain and Italy.

Banks in those countries are trying to cope with rising numbers of bad loans and are reluctant to lend no matter how cheaply they can borrow from the E.C.B. Meanwhile, the central bank remains reluctant to effectively print more money, as the United States Federal Reserve and Bank of England have done, because of opposition from Germany to more aggressive action.

Eurostat also reported Monday that inflation in the euro zone rose to 1.6 percent from 1.4 percent because of a surge in energy prices. While inflation remains below the E.C.B.’s target of about 2 percent, the uptick is likely to provide a further argument against increasing the benchmark interest rate.

Compounding the bank’s challenge, the numbers released Monday showed there remains a big difference in economic performance among euro zone countries. The divergence makes it difficult for the E.C.B. to craft a monetary policy that is appropriate for all members.

Unemployment rates in Spain and Greece were about 27 percent in May, with youth unemployment remaining well above 50 percent. At the other end of the scale, unemployment in Austria was 4.7 percent and in Germany was 5.3 percent. Both had youth jobless rates below 9 percent.

If there was any good news, economists said, it was that unemployment may not go up much more.

“An end to the euro zone labor market downturn is not yet imminent,” Martin van Vliet, an economist at ING Bank, wrote in a note to investors. “However, with the recession across the euro zone petering out, the peak in unemployment should not be too far away, either.”

Article source: http://www.nytimes.com/2013/07/02/business/global/euro-zone-joblessness-rises.html?partner=rss&emc=rss

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