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New York City’s Jobless Rate Increased to 8.6% in August Despite Hiring Gains

September 19, 2013 by

The rise in the unemployment rate, from 8.4 percent in July, reflects an increase in the number of people looking for work in the city, said Barbara Byrne Denham, a private economist who analyzes the official data issued every month by the State Labor Department.

Ms. Denham estimated that employers in the city added 10,200 jobs last month, bringing the total gain for the year so far to nearly 85,000 jobs. The city is on pace to add at least 100,000 jobs in 2013, she said, the biggest increase in a year since 1999.

“The good news is the gains were really across the board,” said Ms. Denham, who works for Eastern Consolidated, a real estate services firm in Manhattan. Ms. Denham performs her own calculations to adjust the Labor Department’s figures for seasonal fluctuations in hiring and firing. The department seasonally adjusts the statewide jobs data, but not the city numbers.

The persistently high unemployment rate has bedeviled Mayor Michael R. Bloomberg and other city officials. On Tuesday, one of Mr. Bloomberg’s deputies, Robert K. Steel, appeared on CNBC to trumpet the strength of the city’s economy. He said the city had gained back twice as many jobs as it lost during the financial crisis that started five years ago.

Ms. Denham agreed with those numbers. By her count, the city lost about 165,000 jobs in the recession, but gained back all of them plus an additional 150,000 jobs.

She too discounted the rising unemployment rate, attributing it to an increase in the number of New Yorkers encouraged about the prospects for finding jobs. The labor force tends to grow when the economy gains steam and hopes of getting hired rise; people without jobs count as unemployed only when they are actively looking for one.

“I think there’s a lot more optimism in the economy,” Ms. Denham said.

Wall Street, which has traditionally led the city’s economy out of recessions, was an exception to the positive trend in August. The securities industry lost about 1,700 jobs last month, leaving it with a net loss so far this year, Ms. Denham said.

Elena Volovelsky, an economist with the State Labor Department, said the number of jobs in computer systems design and advertising in the city rose to “all-time employment highs” in August. She said that the financial industries were weak, but that some of those job losses could have resulted from summer interns’ returning to school.

Statewide, the number of private-sector jobs increased by 22,700 in August, the department reported. The state’s unemployment rate also rose, to 7.6 percent last month from 7.5 percent in July. The national unemployment rate is lower, at 7.3 percent for August.

In New Jersey last month, the numbers moved in the opposite direction: the state lost jobs, but its unemployment rate dipped. The Department of Labor and Workforce Development reported on Thursday that the state’s unemployment rate declined to 8.5 percent in August, from 8.6 percent in July. But it also said that the number of jobs in the state declined by 1,500, making for a two-month loss since June of 12,000 jobs.

According to the official definitions, there were about 392,000 unemployed residents of New Jersey and more than 730,000 in New York State, about half of which lived in New York City.

Article source: http://www.nytimes.com/2013/09/20/nyregion/jobless-rate-in-new-york-rose-in-august-data-say.html?partner=rss&emc=rss

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Deficit Talks Resuming, but Few Sound Hopeful

August 28, 2013 by

The two sides had said they would meet during the August recess, but the gathering will be the first in that time and is intended to take stock before Congress reconvenes in September. Neither side expressed optimism in interviews, with talks snagged on the same issues that killed past bipartisan efforts: Republicans’ demands for deeper Medicare cuts and President Obama’s insistence that they, in return, agree to higher taxes on the wealthy and some corporations.

The apparent lack of progress after months of intermittent meetings suggests that the effort could soon be sidelined, if not ended, as the president and Congress turn to the more pressing work of negotiating measures to finance the government and increase the nation’s borrowing limit before October deadlines. Without the spending measures, the government would shut down on Oct. 1; without a higher debt limit, the nation would be unable to pay bills after mid-October and would risk another financial crisis.

The goal when the bipartisan meetings began last winter, with Mr. Obama inviting Republicans to dinner after his second inauguration, was to agree on a multiyear fiscal deal before the fall that could ease efforts to pass annual spending bills and increase the debt limit. Now it is probably too late.

Even so, the discussion with the group of senators “is the only game in town right now,” said an administration official, who declined to be identified in speaking about the delicate talks. “I don’t know that they will be the final deciders at the end of the day. It might have to be a group that rises out of the House,” where Republicans have a majority.

The group includes eight Republicans who generally have not been central to the budget debates of the past three years, and are not members of either the Senate leadership or the key committees for spending and taxes. Mr. Obama turned to them, and others, after Republican leaders — Speaker John A. Boehner in the House and the Senate minority leader, Mitch McConnell, who is facing a re-election fight in Kentucky — made clear that after three years of budget battles, dead ends and partial compromises, they were finished negotiating with the president.

The Republicans now engaged with the White House include Senators Johnny Isakson of Georgia, Bob Corker of Tennessee, John McCain of Arizona, Lindsey Graham of South Carolina, Kelly Ayotte of New Hampshire, John Hoeven of North Dakota, Ron Johnson of Wisconsin and Dan Coats of Indiana.

Initially, optimists on both sides suggested that the group would bring a fresh approach, as would two newcomers on Mr. Obama’s side — his chief of staff for the second term, Denis R. McDonough, and new budget director, Sylvia Mathews Burwell. But the Republican participants’ lack of institutional clout or following in the Senate have proved a handicap, and they have not proposed their own deficit-reduction outline in response to the one Mr. Obama put forward in April.

Hanging over the talks is the knowledge that any agreement is likely to hit a wall in the Republican-controlled House, where the majority is determined not to compromise with Mr. Obama and where the party’s leaders have been unable to pass even their own fiscal measures over the past year.

The White House meeting will be held three days after Mr. Boehner told Idaho Republicans at a fund-raiser in Boise that “we’re going to have a whale of a fight” over the debt limit.

Treasury Secretary Jacob J. Lew informed Congress this week that without that increase by mid-October, the nation might be unable to pay existing obligations, including Social Security benefits, troops’ pay and creditors’ interest payments — ultimately risking default.

“I wish I could tell you it was going to be pretty and polite, and it would all be finished a month before we’d ever get to the debt ceiling,” Mr. Boehner said in Idaho. “Sorry — it just doesn’t work that way.”

Article source: http://www.nytimes.com/2013/08/29/us/deficit-talks-resuming-but-few-sound-hopeful.html?partner=rss&emc=rss

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Judge Rules Against JPMorgan in Suit Over Billionaire’s Losses

August 26, 2013 by

In a decision made public on Monday, Justice Melvin Schweitzer of the State Supreme Court in Manhattan ordered JPMorgan to pay $42.5 million on the breach of contract claim, plus 5 percent annual interest starting in May 2008.

The judge found JPMorgan was not liable for negligence. His decision was dated Aug. 21, about seven months after the three-week, nonjury trial.

Mr. Blavatnik sued JPMorgan in 2009 to recover more than $100 million that he said the bank lost on a roughly $1 billion investment by CMMF L.L.C., a fund created by his company, Access Industries.

Separately, JPMorgan faces other litigation and investigations involving its handling of mortgage-related businesses during the financial crisis.

According to Mr. Blavatnik, JPMorgan Investment Management promised that it would invest Access’s money conservatively after opening the account in 2006.

Instead, according to Mr. Blavatnik, the bank breached a 20 percent limit for mortgage-backed securities by misclassifying securities that were backed by a pool of subprime loans, known as ABS-home equity loans, as asset-backed rather than mortgage-backed securities.

Access also accused JPMorgan of continuing to hold the troubled securities despite knowing they were inappropriate for the portfolio. CMMF closed the account in May 2008.

In finding JPMorgan liable for exceeding the 20 percent cap, Justice Schweitzer rejected the bank’s argument that “industry practice” was to classify the home equity loans separately from mortgage securities because they carried different risks.

In ruling for JPMorgan on the negligence claim, Justice Schweitzer said that the mortgage securities were considered “relatively safe and desirable” when they were bought, and that JPMorgan acted reasonably in light of current conditions when it advised CMMF to “wait out the storm” rather than sell at depressed prices.

A JPMorgan spokesman, Doug Morris, said: “We are pleased that the court rejected CMMF’s negligence claims, and found that our investment professionals lived up to their responsibilities. We respectfully disagree with the court’s interpretation of our agreement with CMMF, and we are considering our options regarding that finding.”

David Elsberg, a partner at Quinn Emanuel Urquhart Sullivan representing Mr. Blavatnik, said: “Hopefully it signals that banks need to live up to their obligations to clients, and as the court makes clear, not hide behind what they often try to refer to as industry practice.”

Mr. Blavatnik also welcomed the decision. “There are a lot of people out there who, I understand, feel they have been wronged by JPMorgan but cannot afford to take on a huge bank. They shouldn’t have to,” he said in a statement. “JPMorgan should do the right thing because it is the right thing to do.”

Mr. Blavatnik is estimated to be worth about $16 billion, making him the world’s 44th richest person, according to Forbes magazine.

Article source: http://www.nytimes.com/2013/08/27/business/judge-rules-against-jpmorgan-in-suit-over-billionaires-losses.html?partner=rss&emc=rss

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Rising Rates Did Little to Curb July Home Sales

August 21, 2013 by

The National Association of Realtors said on Wednesday that existing-home sales rose 6.5 percent to a seasonally adjusted annual rate of 5.39 million units.

The increase in home sales exceeded Wall Street’s expectations and could make the Federal Reserve more comfortable with its plans to start winding down its economic stimulus program. Mortgage rates have been climbing in anticipation that the Fed will soon taper its stimulus.

While some of July’s surge in home resales may reflect buyers rushing to lock in mortgage rates before they rise further, the data inspired some confidence that the housing recovery was strong enough to withstand higher borrowing costs.

“The basic take-away is that the rise in mortgage rates has been manageable,” said Ryan Sweet, an economist with Moody’s Analytics.

After being devastated by a financial crisis and the 2007-9 recession, the home market appeared to turn a corner early last year, helped by steady job creation and extremely low interest rates.

July’s increase was the fastest pace of sales since November 2009, when a home buyer tax credit was expiring. Such a strong rate of growth could prove temporary, however.

Applications for mortgages to buy homes rose slightly last week, but they have fallen sharply since the spring and remain near a seven-month low, a separate report from the Mortgage Bankers Association showed.

“We expect to see some moderation in activity in the coming months, as higher mortgage rates take some of the air from the recovery,” said Millan Mulraine, an economist at TD Securities.

Since early May, interest rates for 30-year mortgages have risen more than a percentage point. Last week, the average rate for a 30-year mortgage climbed 12 basis points, or hundredths of a percent, to 4.68 percent while refinancing activity slumped, the Mortgage Banker Association said.

The Fed is currently buying $85 billion a month in Treasury and mortgage-backed bonds, but it is expected to scale back purchases as early as September.

Economists polled by Reuters had expected home resales to increase to an annual rate of 5.15 million units in July.

The median price for a previously owned home rose 13.7 percent in July from a year earlier to $213,500. The inventory of unsold homes on the market rose 5.6 percent, for an unchanged 5.1-month supply.

Article source: http://www.nytimes.com/2013/08/22/business/economy/rising-rates-did-little-to-curb-july-home-sales.html?partner=rss&emc=rss

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Greece Beats Budget Targets So Far This Year

August 12, 2013 by

ATHENS, Greece — Greece is beating its budget targets by a wide margin so far this year, preliminary figures showed Monday, although the country is still deep in recession.

Deputy Finance Minister Christos Staikouras said the state budget was estimated to have had a primary surplus — which excludes interest payments on outstanding debt — of 2.6 billion ($3.5 billion) euros for the January-July period.

That is a far better result than its target of a 3.1 billion euro ($4.2 billion) deficit, and marks the first time the government has logged a significant primary surplus.

The actual deficit, including interest payments, came in at 1.9 billion euros, also better than the targeted 7.5 billion euros deficit, the finance ministry’s figures showed. In the same period last year, the country posted a 13.2 billion-euro deficit.

The deficit now stands at 1 percent of gross domestic product, from 6.8 percent in the same period last year, Staikouras said.

Greece has depended on international rescue loans since 2010. In return, it has pledged to overhaul its economy, and has imposed repeated waves of austerity measures. It has reduced spending across the board, including cuts to state salaries and pensions, and increased taxes.

The improvements in the budget this year were achieved by a combination of cutting spending and increased revenues in some taxes.

It was also helped by a one-off payment of about 1.5 billion euros from other European central banks. The money came from Greek government bonds that the European Central Bank had bought earlier during the financial crisis. Rather than keep the money accrued on the bonds, the ECB handed it down to the 17 national central banks in the eurozone, who in turn gave it to the Greek government.

Despite the improvements, however, the economy remains mired in the sixth year of a deep recession that has seen Greece’s economy shrink by about a quarter. Figures released by the statistical authority Monday show economic output shrank by 4.6 percent in the second quarter of 2013, compared with the same three months last year. The figures were not seasonally adjusted.

Separately, the country also completed the sale of a 33 percent stake in its gambling monopoly, OPAP, to a Czech-Greek investment fund, Emma Delta. The sale is part of an ambitious but long delayed privatization program that is part of the country’s bailout conditions.

Greece sold the stake in OPAP for 654 million euros ($874.59 million), the country’s asset development fund said in an announcement.

Article source: http://www.nytimes.com/aponline/2013/08/12/business/ap-eu-greece-financial-crisis.html?partner=rss&emc=rss

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In Germany, Little Appetite to Change Troubled Banks

August 9, 2013 by

Is it Italy, Spain or perhaps Greece? No. That description is of Germany’s banking sector.

While the country’s economy is often held up as a model, German banks are among Europe’s most troubled. They required a bailout bigger than the one American banks received, and many are still struggling to recover.

But there is remarkably little discussion about fundamentally changing the structure of the German banking system. On the contrary, Europe’s economic leaders criticize Germany for slowing progress toward unifying the Continent’s patchwork system of bank regulation, an effort seen as crucial to restoring faith in the euro zone and averting future globe-threatening crises. Ailing German banks are also a dead weight on the euro zone economy as it struggles to crawl out of recession.

“Germany was actually hit very hard by the financial crisis,” said Jörg Rocholl, president of the European School of Management and Technology, a business school in Berlin. But the debate about the future of banking in Germany is “alarmingly nonintense,” Mr. Rocholl said.

Banks in Germany invested in seemingly every bad asset that came their way, including American subprime assets and Greek bonds. “There is no sense of pride that Germans were especially thorough or prudent,” said Sven Giegold, a German who is a member of the Economic and Monetary Affairs Committee in the European Parliament.

Some 646 billion euros, or about $860 billion, was spent or set aside to rescue German banks from 2008 through September 2012, according to European Commission figures. That is the second-highest bailout in Europe after Britain and more than the $700 billion authorized for the Troubled Asset Relief Program in the United States, of which $428 billion has been spent, according to the Congressional Budget Office.

In one recent example of German banking dysfunction, German authorities indicted Bernie Ecclestone, the chief executive of the Formula One auto racing series, in connection with a $44 million bribe said to have been paid to the former chief risk officer of BayernLB, a so-called landesbank owned jointly by the state of Bavaria and community savings banks.

Mr. Ecclestone, accused of making the payoff in 2006 so that the bank would sell its stake in Formula One to his favored buyer, has said he did nothing illegal.

The landesbanks, typically owned by state governments and local institutions, have a long history of corruption and mismanagement. BayernLB already required a 10 billion euro bailout from state taxpayers, and several other of its former top managers were under investigation for insider trading. Six former top managers of HSH Nordbank, a landesbank in Hamburg, are on trial for charges that include fraud and illegally concealing the bank’s true financial state, including losses on loans to the depressed shipping industry.

“Germany’s banking industry has improved its capitalization significantly and is now better off than before the crisis,” said Christopher Pleister, chairman of the German Financial Market Stabilization Agency. He said Germany’s bank restructuring law included strong protections for taxpayers and rigorous oversight. Mr. Pleister said it should be the model for the rest of Europe.

Yet there is little appetite for change in Germany because the banking system is so deeply intertwined with its politics, serving as a rich source of patronage and financing for local projects.

The landesbanks and the country’s roughly 400 local savings banks, known as sparkassen, are controlled by state and municipal politicians. All told, about 45 percent of the German banking industry is in government hands. That is not counting a 25 percent stake in Commerzbank, the country’s second-largest commercial bank, acquired by the federal government in the course of a bailout.

Article source: http://www.nytimes.com/2013/08/10/business/global/in-germany-little-appetite-to-change-troubled-banking-system.html?partner=rss&emc=rss

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It’s the Economy: Did We Waste a Recession?

August 6, 2013 by

Remarkably, five years after the crisis, the health of the financial industry is just as hard to determine. A major bank or financial institution could meet every single regulatory requirement yet still be at risk of collapse, and few of us would even know it. Despite endless calls for change, many of the economists I’ve spoken with have lamented that the reports that banks issue about their finances remain all but useless. The sprawling Dodd-Frank Act, which rewrote banking regulation in 2010, didn’t resolve things so much as inaugurate a process of endless rules-writing by regulators. Meanwhile, the European Union is in the early stages of figuring out how it will change the way it regulates banks; and the gargantuan issue of coordinating regulations across borders has only barely begun. All of these regulatory decisions are complicated, in part, by a vast army of financial-industry lobbyists that overwhelms the relatively few consumer advocates.

Economists have also been locked in their own long-running arguments about how to make the banking industry safer. These disagreements, which are generally split between the left and the right, can have the certainty and anger of religious wars: the right accuses the left of hobbling banks and undermining prosperity; the left counters that the relatively lax regulation advocated by the right will lead to a corrupt oligarchy. But there actually is consensus on one of the most important issues. Paul Schultz, director of the Center for the Study of Financial Regulation at the University of Notre Dame, led a project that brought together scholars of financial regulation from the left, the right and the center to figure out what caused the financial crisis and how to prevent a sequel. They couldn’t agree on anything, he told me. But a great majority favored higher equity requirements, which is bankerspeak for the notion that banks shouldn’t be allowed to borrow so much.

I conducted my own Schultz test by talking to Anat Admati and Charles Calomiris, prominent finance professors at Stanford and Columbia, respectively, who roughly define the opposite ends of the argument over bank regulation. Admati is a Democrat, Calomiris a Republican. In her recent book, “The Bankers’ New Clothes,” for example, Admati has argued that bankers misrepresent their finances. Calomiris, who used to be a banker, is generally seen as friendly to the field. As I spoke to them both, they also disagreed on everything until the conversation turned to borrowing. At which point, they independently explained that banks borrow too much, that the government rules are too confusing and that the public has been misled.

I asked Admati and Calomiris to explain their problem with the current system. I randomly chose Citigroup’s most recent annual S.E.C. report, a 300-page tome filled with complex legal jargon outlining the bank’s performance. The key number that we looked for was the capital-adequacy ratio, which is a measure of how much capital you need to back up the risk of your assets. This is supposed to be the one number that makes clear whether a bank is prepared for a crisis. A high ratio means the bank’s owners could bear most losses without requiring a bailout. A low number means the opposite.

It was extremely hard, though, to know how Citi was faring. Calomiris pointed out that the bank reports several different measures, ranging from what appears to be a safe capital ratio of 17.26 percent (implying the bank maintains a loss-absorbing buffer of $17 for every $100 of the assets it owns) to a potentially worrisome 7.48 percent (with stops at 14.06, 12.67 and 8.7 percent). When I asked Admati how healthy the bank was, she replied, “It’s hopeless for anyone to know.”

Article source: http://www.nytimes.com/2013/08/11/magazine/financial-crisis.html?partner=rss&emc=rss

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Diverging Debate at Fed on When to End Stimulus

July 10, 2013 by Leave a Comment

Mr. Bernanke has begun to prepare the way for the Fed to scale back on its effort to cut borrowing costs for businesses and consumers through the monthly purchase of vast quantities of Treasuries and mortgage-backed securities. Although a growing number of Fed officials want the bond buying to end more quickly, Mr. Bernanke sought on Wednesday to emphasize that an end to bond buying would not signal a broader change in the Fed’s commitment to support economic expansion and reduce unemployment.

“The overall message is accommodation,” Mr. Bernanke told a gathering of economists in Cambridge, Mass. “There is some prospective, gradual and possible change in the mix of instruments, but that shouldn’t be confused with the overall thrust of policy.”

The Fed has said that it plans to hold short-term interest rates near zero at least as long as the unemployment rate remains above 6.5 percent. Mr. Bernanke echoed recent remarks by other Fed officials in suggesting that the Fed was likely to maintain its suppression of short-term interest rates for some time after unemployment dropped below that threshold, and that officials were considering lowering the threshold.

Mr. Bernanke and other Fed officials have not fully explained this emerging shift in their strategy, in part because they do not seem to agree. Some officials say that asset purchases have been effective but are no longer necessary. Other officials say the purchases have failed to meet expectations. Still others say they are worried that the purchases could destabilize financial markets.

The Fed began last September to expand its holdings of Treasuries and mortgage bonds by $85 billion a month, the third major expansion of its investment holdings since the financial crisis. It now owns more than $3 trillion in bonds.

Mr. Bernanke said last month, after the most recent meeting of the Fed’s policy-making committee, that the central bank planned to gradually taper its monthly bond purchases starting later this year and ending in the middle of next year, so long as economic growth continues.

But “about half” of the 19 officials who participated in the policy meeting said in an internal survey beforehand “that it likely would be appropriate to end asset purchases late this year,” according to an account of the meeting that the Fed released Wednesday after a standard delay.

The account does not imply an earlier endpoint to the bond-buying program. Only 12 of the 19 officials vote each year, and proponents of a later end date still command a majority of the votes. Moreover, officials have said repeatedly that the timing will depend on economic conditions, in particular on evidence that the labor market outlook has improved substantially.

That is a standard the economy has yet to meet, at least to the satisfaction of the majority that backs the bond-buying program, known as quantitative easing. The account underscored that a decision to decelerate later this year still hangs in the balance.

“Many members indicated that further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of asset purchases,” the account said. “Some added that they would, as well, need to see more evidence that the projected acceleration in economic activity would occur, before reducing the pace of asset purchases.”

Mr. Bernanke’s earlier announcement that the Fed intended to dial back the pace of its purchases later this year unsettled investors who have staked vast sums on the Fed’s plans. Longer-term borrowing costs rose, in part because of the assertion that the economy was doing better and in part because of the suggestion that the central bank intended to provide less help than investors had expected.

The average rate on a 30-year home mortgage has increased from 3.35 percent in early May to 4.29 percent last week, according to Freddie Mac, causing refinancing to diminish and raising questions about whether higher rates might soon start affecting home buying.

A flurry of follow-up speeches by Fed officials helped to stabilize markets, but did not reverse the initial rise in interest rates.

Article source: http://www.nytimes.com/2013/07/11/business/economy/rising-chorus-at-the-fed-to-end-stimulus-sooner.html?partner=rss&emc=rss

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Pace of Consumer Borrowing Rose in May

July 8, 2013 by Leave a Comment

Americans stepped up their borrowing by $19.6 billion in May compared with April, the Federal Reserve said on Monday in its monthly report on consumer credit. That was the biggest jump since a $19.9 billion rise in May 2012.

Total borrowing reached a record $2.84 trillion.

The category that includes credit card use rose $6.6 billion, also the largest gain in a year. Credit card debt reached $847.1 billion, the most since September 2010. Credit card debt remains about 16 percent below its high of $1.02 trillion in July 2008 — just before the financial crisis erupted.

Borrowing for autos and student loans rose $13 billion in May. That was the sharpest increase since February. This category of borrowing has been rising especially fast, driven by loans to pay for college.

The Fed’s consumer credit report does not separate student loans from auto loans. But data from the Federal Reserve Bank of New York shows that student loan debt has been the biggest driver of borrowing since the recession officially ended. In part, that is because some unemployed Americans have returned to school for training in hopes of landing a job.

Despite the increase in credit card debt in May, consumers are not likely to raise their card use to prerecession levels, said Cooper Howes, an economist at Barclays Research. “We expect the trends of student loan-driven expansion,” Mr. Howes said, “and only small changes in revolving credit to continue in coming months.”

The measure of credit card debt in the Fed’s report has risen $15.8 billion this year. That compares with annual increases from $25 billion to $50 billion in credit card debt before the recession, which officially began in December 2007 and ended in June 2009.

Consumers increased their spending from January through March but reduced the pace of their savings to finance it. After-tax income dropped in the first quarter.

Article source: http://www.nytimes.com/2013/07/09/business/economy/pace-of-consumer-borrowing-climbs-a-sign-of-confidence.html?partner=rss&emc=rss

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Euro Zone Joblessness Rises

July 1, 2013 by Leave a Comment

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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