September 22, 2021

Number of Jobless People Declines Slightly in Europe

PARIS — While unemployment remained at record levels in percentage terms, the actual number of jobless people in the euro zone fell slightly in July, according to data published on Friday, offering fresh evidence that Europe’s struggling economy was taking tentative steps toward a recovery.

The tiny improvement in employment — which came alongside declining inflation and a survey showing improved confidence among European consumers and business managers — was welcomed as additional evidence that the worst of the region’s downturn was probably over. Still, officials and economists cautioned that the economic health of Europe remained fragile and the pace of recovery highly uneven within the region, underscoring the challenge for policy makers and central bankers.

“The recent improvements are minimal,” said Laszlo Andor, the European Union’s commissioner for employment. “This is no time for celebration or complacency.”

The jobless rate in the 17 countries that share the euro was 12.1 percent in July, adjusting for seasonal effects, according to a report from Eurostat, the European Union statistics agency. That figure has remained unchanged for several months. A year earlier, it was 11.5 percent.

Eurostat estimated that 19.2 million people in the euro area were jobless in July, 15,000 fewer than in from June.

For all 28 countries in the European Union, the number of unemployed fell by 33,000, to 26.7 million, for a rate of 11 percent. The European bloc expanded from 27 members to 28 on July 1, when Croatia joined.

Joblessness in the euro zone has been marching higher almost without interruption for more than five years, declining only briefly at the beginning of 2011. The July data showed the first back-to-back monthly decline in the number of jobless since April 2011.

But while some countries, like Germany, Austria and the Netherlands, have managed to weather the crisis with relatively little human cost, their Southern European neighbors — crippled by the euro zone’s debt crisis — still confront devastating levels of joblessness, particularly among the young.

“Against the background of what we’ve seen over last 18 months, yes, this is good news,” Carsten Brzeski, an economist at ING Bank in Brussels, said of the employment figures. “But tell that to the people who are still unemployed in places like Spain.”

The figures released on Friday again demonstrated the large disparity in growth and unemployment rates.

Unemployment in Germany stood at 5.3 percent in July, while Austria’s rate was 4.8 percent — less than one-fifth the levels recorded in Greece and Spain.

Andrea Broughton, principal research fellow at the Institute for Employment Studies in Brighton, England, emphasized the high levels of youth unemployment in many parts of Europe. In Greece, where the jobless rate is already among Europe’s highest at nearly 28 percent, youth unemployment was 62.9 percent in May, the latest month available for that country. In Spain and Croatia, more than half the young people remain out of work.

Nonetheless, Mr. Brzeski of ING said there were growing signs that Europe’s downturn had bottomed out and that structural reforms introduced in Spain, Portugal and other pockets of Europe’s “periphery” had begun to bear fruit.

He pointed to the European Commission survey of business and consumer confidence for August, which was also released on Friday, showing that optimism among company managers had reached its highest level in two years.

“Unit labor costs in many peripheral countries really have been improving,” he said. There was a nascent sense among businesses in those countries, he added, that “finally, something has been done and it’s showing some effect.”

The confidence survey, conducted by the executive agency of the European Union, showed that sentiment was improving not only in relatively healthy economies like Germany and the Netherlands but also in Italy and Spain, which have been among the hardest hit by the downturn.

The index of sentiment within the euro zone, based on factors including business orders, industrial confidence and hiring plans, rose 2.7 points to 95.2, the European Commission said. Across the European Union, the measure rose 3.1 points to 98.1.

Consumer confidence also improved, thanks mainly to brighter expectations about the economic situation over the next 12 months. Expectations about employment, however, remained unchanged.

Europe’s stagnant economy continued to keep a lid on prices. Eurostat on Friday forecast that annual consumer price inflation would decline to 1.3 percent in August from 1.6 percent a month earlier, largely because of a drop in energy prices.

This low-inflation trend, economists said, provides useful ammunition to the European Central Bank, which remains reluctant to raise its benchmark interest rate from a record low of 0.5 percent.

“As long as inflation remains well behaved and clearly below 2 percent,” Mr. Brzeski said, “I think the E.C.B. can sit very comfortably where it is right now.”

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Jobs Data Ease Fears of Economic Slowdown in U.S.

This push-and-pull dynamic was evident in data released Friday by the Labor Department, as private employers added 176,000 people to their payrolls even as the public sector shed an additional 11,000 workers.

The latest figures painted a somewhat brighter picture of the overall economy than had been expected as the government sharply revised upward its estimate for job creation in the previous two months. Those revisions concluded that the economy generated a robust 332,000 jobs in February, not the 268,000 originally reported, and 138,000 in March, up from 88,000.

The news sent the stock market soaring to new highs, with major stock market indexes closing up 1 percent for the day.

Still, at 7.5 percent, a slight drop from last month’s 7.6 percent, the jobless rate remains far higher than it typically would be this far into a recovery. It is also a full percentage point above the level the Federal Reserve has said it wants to see before it will consider raising interest rates from their current levels near zero.

As a result, most experts expect the economy to continue to be buffeted by countervailing factors in the months ahead, with business activity and the Fed providing a healthy measure of support for growth even as fiscal austerity in Washington makes a substantial drop in the unemployment rate unlikely.

“The drag from the government sector is quite substantial,” said Gregory Daco, senior principal economist at IHS Global Insight. “Given the fiscal headwinds, the private sector is doing O.K.”

Despite repeated fears of a double-dip recession, an economy that has endured a spring swoon for three consecutive years and other potential perils, the country’s rate of job creation has been remarkably steady, if subdued. Over the last three years, the economy has added an average of 162,000 jobs a month, within a hairbreadth of April’s pace, at least as initially estimated, of 165,000 new jobs.

But experts have been warning that the economy and job creation are likely to slow in the second quarter, largely as a result of fiscal tightening in Washington. Payroll taxes increased in January, and the effect of across-the-board spending cuts mandated by Congress is expected to be felt more broadly in the months ahead.

While the private sector has been on the upswing since last summer, cutbacks in government employment continue to prevent a stronger acceleration in the economy, economists said.

“If it weren’t for the government, the economy would be stronger,” said Mr. Daco, citing the spending cuts hitting now, as well as the higher Social Security deductions for all workers and increased income taxes for top earners that began in January.

On the other hand, he said, “If the Fed hadn’t loosened monetary policy, we’d be seeing weaker growth. Both sides are generating opposing forces.”

Even though job growth now looks better, continued strains in the economy and data this week showing inflation over the last 12 months running at a low 1 percent rate suggest that the Fed is not likely to slow its $85 billion in monthly bond purchases intended to stimulate the economy for at least the next few months. On Wednesday, the Fed said it was “prepared to increase or reduce the pace of its purchases,” depending on the outlook for the labor market and inflation.

The White House was quick to highlight Friday’s report, even as it warned of the potential dangers from the fiscal squeeze.

“While more work remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression,” Alan Krueger, chairman of President Obama’s Council of Economic Advisers, said in a statement. Mr. Krueger urged Congress to replace automatic budget cuts with a more balanced approach. “Now is not the time for Washington to impose self-inflicted wounds on the economy,” he said.

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Economix Blog: Job Openings Rise, but Unemployment Stays High



Dollars to doughnuts.

The Labor Department has released its latest report on job openings and labor turnover today, which showed that job vacancies were at their post-recession high in February. But we still have a strangely high unemployment rate relative to the job openings rate, at least when compared with the relationship these two variables had before the recession began.

Source: Bureau of Labor Statistics, Current Population Survey and Job Openings and Labor Turnover Survey, April 9, 2013.Bureau of Labor Statistics Source: Bureau of Labor Statistics, Current Population Survey and Job Openings and Labor Turnover Survey, April 9, 2013.

The chart above is the Beveridge Curve, named for the British economist William Henry Beveridge. It shows the relationship between the unemployment rate and the job openings rate. As I also explained in an earlier post, during an expansion the jobless rate is low and the job vacancy rate is high; a small share of workers are looking for jobs, and so when employers post a vacancy, the opening can be hard to fill (or alternately, if there are a lot of jobs available, people will not have much trouble finding work, leading to low unemployment).

In a recession, the reverse is true: there is a high unemployment rate and a low vacancy rate. Where you end up on the curve generally depends on where you are in the business cycle, but you will probably be somewhere on or near that line.

Since late 2009, though, the Beveridge Curve has shifted outward. That means that even though today’s job market is not great, there are still more vacancies out there than the unemployment rate alone would have predicted a few years ago.

It’s not clear why that’s the case, but the answer probably involves some combination of skill mismatch; whether all the people who are calling themselves unemployed today might have done so in previous years; and hiring paralysis at firms that have vacancies but are afraid of making a hiring mistake in a still-uncertain economy.

One of the bright spots in today’s Labor Department’s report was that the quits rate (the number of people quitting divided by total employment) held steady at the peak for the recovery period so far. Janet Yellen, vice chairwoman of the Federal Reserve, recently said that she was looking for a pickup in the quits rate as a “signal that workers perceive that their chances to be rehired are good — in other words, that labor demand has strengthened.”

Layoffs and discharges remain quite low; the problem in the job market remains too little hiring, not too much firing.

Here’s a look at the ratio of quits to layoffs/discharges, which as you can see has been generally rising in the last four years:

Source: Bureau of Labor Statistics, Job Openings and Labor Turnover Survey, April 9, 2013. Note: Shaded area represents recession as determined by the National Bureau of Economic Research.Bureau of Labor Statistics Source: Bureau of Labor Statistics, Job Openings and Labor Turnover Survey, April 9, 2013. Note: Shaded area represents recession as determined by the National Bureau of Economic Research.

The ratio peaked in August 2006, when there were 1.8 people quitting their jobs for each person laid off or discharged. It fell to 0.7 in April 2009, near the end of the recession, and is now about 1.4.

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Unemployment in Euro Zone Reaches a Record 12%

Spending cuts and tax increases aimed at trimming debt and addressing the financial crises in bailed-out euro zone countries, and the rising rate of joblessness in much of the currency bloc, “are feeding off of each other,” said Mark Cliffe, chief economist at ING Group.

“It’s a bit of a vicious circle,” he said. “Europe is pursuing a policy that is self-evidently failing.”

The euro zone jobless rate rose to 12.0 percent in the first two months of the year, the latest in a series of record highs tracing to late 2011, Eurostat, the statistical agency of the European Union, reported Tuesday.

The agency revised upward the January jobless rate for the euro zone from the previously reported 11.9 percent, itself a record. For the overall European Union, Eurostat said the February jobless rate rose to 10.9 percent from 10.8 percent in January, with more than 26 million people without work across the 27-nation bloc.

Both the jobless rates and the number of unemployed are the highest Eurostat has recorded in data that reach back to 1995, before the creation of the euro.

Europe’s rising unemployment is in increasingly stark contrast to the jobs recovery in the United States, where unemployment in February declined to 7.7 percent, the lowest level since late 2008. The consensus among economists surveyed by Reuters is for the U.S. economy to show a gain of 200,000 jobs in March, after a gain of 236,000 in February. The labor data will be released Friday.

With most European economies either contracting or barely growing, any hiring that is being done by Europe’s companies tends to be taking place elsewhere. Volkswagen, aspiring to become the world’s largest automaker within a few years, is planning to hire 50,000 workers by 2018, raising its total work force to 600,000 employees, according to Bernd Osterloh, the chairman of the German carmaker’s workers council.

But the company wants to add production where the demand is.

“Volkswagen is growing, and is therefore continuing to hire in production,” Mr. Osterloh said in an article that appeared Tuesday in the German daily Handelsblatt. More of the new employees will be added in China than in Europe, he told the newspaper.

The European car market, meanwhile, is at its lowest level in nearly two decades — a side effect of the weak regional economy and the growing number of people without paychecks to spend.

After Greece’s staggering debt problems became apparent in 2009, political leaders and the European Central Bank began demanding that member nations cut government spending and raise taxes to bring their budgets in line with European rules. Those efforts, along with a commitment from the E.C.B. to do whatever is necessary to defend the euro, have helped to ease the near-panic that has gripped the euro zone as recently as last year.

But lower government spending also reduces overall demand for goods and services, weakening the overall economy and the labor market.

In the absence of new measures to stimulate growth at the European and national levels, all attention will be focused Thursday on the governing council of the European Central Bank, which meets in Frankfurt to consider whether to maintain interest rates at their current record low or cut even further. Economists said that the data Tuesday would give the E.C.B. greater scope to cut its main interest rate target from the current 0.75 percent, but that the bank would probably hold its fire for now.

The jobless crisis is hitting hardest in the south of Europe. Eurostat said Greece, with its economy in free fall, had the euro zone’s highest unemployment rate ,at 26.4 percent in December, the latest month for which data are available. Among Greek youth, the jobless rate has hit a staggering level, 58.4 percent.

Spain, where the economy has contracted sharply after the collapse of the global credit bubble, posted the second-highest unemployment rate in the euro zone in February, at 26.3 percent.

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Euro Watch: Euro Zone Economy’s Slide Accelerates, Data Show

An index of euro zone purchasing managers by Markit Economics fell in March to 46.5 from 47.9 in February, with the rate of decline worsening for the second month in a row.

The purchasing managers composite index has fallen in every month but one since September 2011. An index above 50.0 suggests economic expansion, while a level below that suggests contraction.

The economy of the 17-nation euro zone, which accounts for nearly three-quarters of the overall E.U. gross domestic product, shrank for a fifth straight quarter at the end of 2012, and indications suggest that trend will continue in January through March period.

A record jobless rate of 11.9 percent and government budget-balancing measures have hurt household spending across most of Europe, even as the United States continues to grow modestly.

Separate Markit reports showed both the German and French economies, the two largest in the euro zone, losing steam. The German composite index came in Thursday at 51.0 for March, down from 53.3 in February. The French composite index was worse, falling to 42.1 for March from 43.1 in February, as service and manufacturing activity declined.

Martin van Vliet, an economist at ING Bank in Amsterdam, said the report Thursday “pours cold water on hopes of an imminent end to the euro zone recession,” as it showed domestic demand remaining weak across Europe.

Mr. van Vliet said he had “penciled in a return to growth” for the euro zone in the second quarter, led by a German rebound, after a small January-March contraction. But with Germany now apparently slowing and Cyprus struggling to work out a bailout, he said, both the first and second quarters may now disappoint expectations. Mr. van Vliet said it was also looking increasingly likely that his forecast for a 0.3 percent contraction of the euro zone this year would turn out to be too optimistic.

The data contrast with a continuing uptick in euro zone economic sentiment. The European Commission said in February that its economic and business confidence indicator in the 17 countries using the euro had improved for the fourth straight month last month, as industrial orders rose.

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Pressure Mounts on France to Overhaul Labor Rules

PARIS — The French unemployment rate ended last year at its highest level since 1999, the national statistics institute reported Thursday, underscoring the urgency of President François Hollande’s task as he pushes for a far-reaching labor law overhaul intended to encourage new hiring.

The jobless rate rose to 10.6 percent in the October-December period, up 0.4 percentage point from the previous quarter, the statistics agency, Insee, said, as gross domestic product shrank 0.3 percent amid government austerity measures. Almost 26 percent of young people were classified as jobless, Insee said.

The unemployment rate has risen for six consecutive quarters, putting pressure on public finances and turning an uncomfortable spotlight on the Socialist president’s campaign promise to get the labor market moving in the right direction by the end of this year.

The answer, the government hopes, lies in a “flexicurity” agreement signed Jan. 11 by employers and unions that would give companies more freedom to hire and fire. On Wednesday, Prime Minister Jean-Marc Ayrault’s cabinet endorsed the deal, and said it would present it to Parliament for approval this spring.

“This is a win-win deal for businesses that get into trouble, that have to reorganize,” Mr. Ayrault said, adding that the accord gives companies a tool other than layoffs for addressing their problems.

The agreement, which draws on ideas pioneered in Denmark, a country with one of the world’s most flexible labor markets, would probably not have been possible a generation ago, or even under Mr. Hollande’s predecessor, Nicolas Sarkozy. But several years of crisis and economic stagnation have led to an acknowledgement across most of the political spectrum that relatively high labor costs are making it harder for French workers to compete when jobs can easily be outsourced to low-wage countries.

Those concerns have been magnified by a recent diatribe against French workers by an American tire company executive, Maurice Taylor Jr., who said he would be “stupid” to invest in a French factory, and a call for a “competitiveness shock” from a former top aerospace executive, Louis Gallois.

Stefano Scarpetta, head of the labor division at the Organization for Economic Cooperation and Development, said the French appeared to be learning from the example set by Germany, where companies faced with a less rigid labor code have better weathered the recent crises and where unemployment, at 5.3 percent, is half the level in France.

“The lesson we learned from the German model is that by promoting internal adjustment in the firm you can reduce the impact of a shock,” he said. “The French agreement promotes that kind of adjustment.”

The Jan. 11 proposal would allow companies facing serious problems to negotiate with unions to cut working hours and wages for up to two years, reducing the incentive to lay off employees. That is particularly important, Mr. Scarpetta said, because tools like flex-time arrangements have allowed German employers to retain most of their employees by reducing the overall hours worked.

The proposal would make it easier for employees to be reassigned and would cap the amount that laid-off workers could be awarded by labor courts. Another area of major change would be the way in which layoffs are managed. Currently, companies announcing a major restructuring open themselves to time-consuming and expensive legal maneuvering. But in cases where unions oppose restructuring plans, the new accord would give companies the right to seek approval directly from government labor administrators, reducing the judiciary’s role in the process.

In exchange, employers would have to pay more of the health care costs for about 3.5 million, mostly lower-wage, workers. Companies would be discouraged from short-term hiring by a payroll tax surcharge, graduated downward as the term of contracts increased. Workers would gain seats on the boards of major enterprises. And those who were laid off would not lose their accumulated unemployment benefits as soon as they returned to work, as currently, giving them more incentive to get off the dole.

Despite the additional costs, the deal is widely backed by the corporate sector. Laurence Parisot, president of Medef, the main business lobby, on Wednesday hailed the plan as one that would help end “the divisions that for 40 years have limited France’s capacity to transform itself, to evolve, to rise to the challenges with which it is confronted.”

The question now, Mr. Scarpetta said, is how well it survives its trip through Parliament.

The principal opposition party, the center-right U.M.P., argues that the measures do not go far enough to unfetter employers, but many members are expected to support the plan provided it remains largely intact.

That support would be unnecessary if Mr. Hollande’s own parliamentary bloc were solidly behind the proposal, but there is unease among some of the government’s allies. The far-left leader Jean-Luc Mélenchon this week described the accord as “villainous” and accused Mr. Hollande of carrying through Mr. Sarkozy’s work. Perhaps more glaringly, two of France’s most militant unions — the Confédération Générale du Travail and Force Ouvrière — have refused to sign on, weakening the claim that it was made with the backing of workers.

Still, the unions have shown that they are prepared to give ground in the face of economic necessity. Force Ouvrière said Wednesday that it had agreed to restructuring plans at Renault that would allow the automaker to increase working hours, freeze wages and lay off workers.

In any case, Mr. Scarpetta said, “It’s already a good sign” that unions and employers have come this far. “It’s a step in the right direction.”

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Fed to Hold Rates Down Until Jobless Rate Is Below 6.5%

WASHINGTON — The Federal Reserve said Wednesday that it would maintain its efforts to revive the economy in the new year by continuing its monthly purchases of $85 billion in Treasury bonds and mortgage-backed securities.

The Fed said it would keep buying bonds until the outlook for the labor market improves substantially, reiterating a policy it first announced in September.

Looking even further into the future, the Fed said that it expected to maintain short-term interest rates near zero, even after it stops buying bonds, for as long as the unemployment rate remained above 6.5 percent, provided that medium-term inflation does not exceed 2.5 percent. The November jobless rate was 7.7 percent.

That replaces the central bank’s earlier guidance that it expected interest rates to remain near zero at least until mid-2015, further emphasizing that reducing unemployment is now the Fed’s priority.

As in September, the Fed’s statement suggested that it is not responding to evidence of new economic problems, but instead increasing its efforts to address existing problems that have restrained a recovery for more than three years.

“The committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens,” the Fed’s policy-making committee said in a statement issued after a two-day meeting in Washington.

The action was supported by 11 members of the committee, led by the chairman, Ben S. Bernanke. The only dissent came from Jeffrey M. Lacker, president of the Federal Reserve Bank of Richmond, who would like the Fed to do less.

The Fed announced in September that it would expand its holdings of mortgage-backed securities by about $40 billion a month until the outlook for the job market showed “sustained improvement.” The central bank also said that it planned to hold short-term interest rates near zero until at least the middle of 2015.

The announcement was the first time that the Fed had tied the duration of an aid program solely to its economic objectives, omitting any end point. The Fed also broke new ground by insisting that the purchases would continue even as the economy began to recover. Both steps were intended to underscore the central bank’s commitment to reducing unemployment, formalizing a shift away from the decades when inflation was its constant priority.

This week’s meeting marked the first test of that commitment. The Fed had announced earlier in the year that it would buy about $45 billion in Treasury securities each month through the end of December. Its September announcement underscored that the two sets of purchases should be considered part of a single effort. So the decision about whether to keep buying Treasuries in the new year stood as the first checkpoint for the promises made in September.

The Fed’s asset purchases are akin to removing seats from a game of musical chairs. Would-be investors in Treasuries and mortgage bonds are forced to compete for the remaining supply by accepting lower interest rates — that is, they are forced to pay upfront a larger share of the money they are entitled to receive as the bond matures.

A number of Fed officials have said in recent weeks that they see clear evidence the new mortgage purchases are reducing interest rates for borrowers. William C. Dudley, president of the Federal Reserve Bank of New York, noted in a recent speech that average rates on 30-year fixed mortgages had fallen by about 0.23 percentage points since September – and even more since the first rumblings in August that the Fed was planning to start buying mortgage bonds.

Indeed, some Fed officials argue that the mortgage bond purchases have a larger impact on the economy than buying Treasuries. The purchases allow the Fed to target interest rates in a critical economic sector. Fed Governor Jeremy C. Stein also argued recently that reducing the cost of mortgage loans has a larger economic impact than reducing the cost of corporate borrowing because people are more likely to take the money that they save and spend it.

But the Fed already is purchasing more than half of the volume of new mortgage securities, leaving little room to expand those purchases without essentially replacing the private market. And by law, the Fed is barred from buying most other kinds of securities. That leaves Treasuries, which are not in short supply, thanks to the federal government’s ever-expanding debts.

The Fed also will publish later Wednesday updated economic forecasts submitted by the members of its policy-making committee. Some of those officials have sounded increasingly upbeat in recent weeks, but they also have repeatedly overestimated the health of the economy and the pace of the recovery.

The forecasts published Wednesday will all be optimistic in at least one respect. They will assume that Congress and the White House reach a deal to avert scheduled tax increases and spending cuts next year.

If not, Fed officials agree that their own efforts will be trivial in comparison to the negative consequences, and that the economy likely will return to recession.

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Euro Watch: Spending Data Points to Continuing Woes in Euro Zone

Retail sales in the 17-nation euro zone fell 1.2 percent in October from September, and were down 3.6 percent from a year earlier, Eurostat, the statistical agency of the European Union, reported Wednesday.

For the entire 27-nation European Union, sales declined 1.1 percent from September and 2.4 percent from October 2011, Eurostat said.

The big dip in retail sales was partly a result of front-loading of purchases before value-added taxes rose in some countries, said James Nixon, an economist in London for Société Générale.

The fiscal crisis in the euro zone and the austerity measures employed to combat it have made companies reticent about hiring, helping to drive the euro zone into recession in the third quarter. That has created a vicious circle, in which falling consumer spending is expected to weigh further on the economy.

A reading Wednesday on euro zone activity from a private data and analysis firm also suggested the economy continued to contract. Markit Economics’ composite purchasing managers’ index for November came in at 46.5. That was a bump upward from the 40-month low of 45.7 in October, but the 10th straight month below 50, a level that suggests shrinking output.

On Friday, Eurostat reported that unemployment in the euro zone rose to a record 11.7 percent in October from 11.6 percent a month earlier, and that the jobless rate among those under 25 years of age was 23.9 percent.

The European Commission on Wednesday expressed grave concern about the problem of youth unemployment, noting that just the immediate cost to governments — in terms of lost revenue and social outlays — worked out to an estimated €150 billion, or $196 billion, a year, or 1.2 percent of E.U. gross domestic product.

It recommended a new program to address the problem, with measures including job guarantees for young people, labor market changes to reduce obstacles to hiring across European borders, and further efforts to provide high-quality training and apprenticeship programs.

The European commissioner for employment and social affairs, Laszlo Andor, said in a statement that the cost of failing to help put young people to work would be “catastrophic.”

The European Central Bank and its British counterpart, the Bank of England, will hold policy meetings Thursday, and though signs of weakness would appear to give the central banks scope for action, neither is believed to be planning any major changes to current monetary policy.

Economists expect the E.C.B. to leave its main refinancing rate at 0.75 percent, while the Bank of England is expected to stand pat at 0.5 percent.

Action by the central banks has helped to calm markets and relieve the pressure on the euro, but conditions remain unsettled. As an indication of the stresses that have sent investors scurrying for the perceived safety of major sovereign bonds, yields on France’s 10-year sovereign debt fell on Wednesday to around 2 percent, the lowest level on record.

The dismal retail sales data came as the European Stability Mechanism, the euro zone’s permanent new bailout fund, said it had issued about €39.5 billion in bonds to cover the recapitalization of Spain’s banking sector.

Euro zone leaders agreed in June to provide up to €100 billion to help Spanish banks, which have been battered in the aftermath of a property bubble collapse and economic dislocation caused by austerity measures. The funds were originally raised by the bloc’s temporary bailout fund, the European Financial Stability Facility, and the transaction Wednesday represented an effective transfer of that money from the old facility to the permanent one.

The fund said that €37 billion would be handed over some time in December to the Spanish government’s own banking rescue fund, the FROB, to cover the needs of BFA-Bankia, Catalunya Banc, NCG Banco and Banco de Valencia. The FROB will use the remaining €2.5 billion to capitalize Spain’s “bad bank,” a company called Sareb that is being used to sift through soured assets.

The action Wednesday “is an important event as the E.S.M. has now started to actively fulfill its role as the permanent rescue mechanism for the euro zone,” Klaus Regling, the head of the European Stability Mechanism, said in a statement.

Mr. Nixon, of Société Générale, predicted that the euro zone economy would shrink in the fourth quarter at an annualized 1.2 percent rate, but said he expected some of the northern European economies, including Germany, to start pulling away from the laggards in 2013.

“We may have reached a bottom,” Mr. Nixon said, citing an easing of tension in the market for sovereign debt and smoother financing conditions. “At least things aren’t getting worse any faster.”

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Unemployment Claims Drop, but Economic Growth Is Slower

Initial claims for state unemployment benefits dropped 4,000 to a seasonally adjusted 364,000, the Labor Department said on Thursday. That was the lowest number since April 2008.

In other economic news, a survey released on Thursday showed that consumer sentiment rose in December to its highest level in six months. And a gauge of future economic activity increased more than expected in November because of a sharp pickup in new permits to build homes.

But revised data showed that the nation’s economic growth was slower than previously estimated in the third quarter because of a sharp drop in health care spending. Stronger business investment and a fall in inventories pointed to a pickup in output in the current period.

The United States economy has shown signs it is gaining steam as the year ends, although the recovery still could be derailed by any big flare-up in Europe’s debt crisis.

JOBLESS CLAIMS The decline in jobless claims last week was a more positive development than expected. Economists polled by Reuters had forecast claims rising to 375,000 last week.

The previous week’s jobless claims data was revised up to 368,000 from the previously reported 366,000.

The level of unemployment claims has fallen in recent weeks, and analysts say fewer layoffs means employers are probably more likely to hire.

Economists at Goldman Sachs said earlier in the week that weekly claims below 435,000 pointed to net monthly gains in jobs. Their research was based on figures available through October.

In November, the jobless rate dropped to a two-and-a-half-year low of 8.6 percent. The Federal Reserve last week acknowledged an improvement in the jobs market, but said unemployment remained high and left the door open for further measures to help the economy.

ECONOMIC OUTPUT In a report released on Thursday, the Commerce Department said in its final estimate that gross domestic product grew at a 1.8 percent annual rate in the July-September quarter, down from the previously estimated 2 percent.

Economists had expected growth to be unrevised at 2 percent. Though spending on health care dropped by $2.2 billion, spending on durable goods was stronger than previously estimated, indicating that the household appetite to consume remained healthy.

A previous report said that health care spending increased at a $19.7 billion rate. Health care spending subtracted about 0.1 of a percentage point from the G.D.P. change in the final revision, whereas in the previous estimate, it added 0.61 of a percentage point to growth.

Despite the downward revision, the third-quarter growth is still a step up from the April-June period’s 1.3 percent pace. Part of the pickup in output during the last quarter reflected a reversal of factors that held back growth earlier in the year.

A jump in gasoline prices weighed on consumer spending earlier in the year, and supply disruptions from Japan’s big earthquake and tsunami in March curbed auto production.

The government revised consumer spending to a 1.7 percent growth rate from 2.3 percent because of adjustments to health care services, in particular nonprofit hospitals.

Spending on durable goods was, however, revised up to a 5.7 percent pace from 5.5 percent.

Business inventories dropped by $2 billion, which sliced 1.35 percentage points from G.D.P. growth. Inventories previously were estimated to have declined $8.5 billion.

The drag from inventories was offset by strong business spending, which increased at a 15.7 percent rate, instead of 14.8 percent.

CONSUMER SENTIMENT In a fresh sign of economic hope, a survey released Thursday showed that Thomson Reuters University of Michigan’s final reading on the overall index on consumer sentiment rose to 69.9 points in December from 64.1 the previous month.

It topped the median forecast of 68 points among economists polled by Reuters and beat December’s preliminary figure of 67.7.

Over all, real spending is expected to increase by 1.8 percent in 2012 as long as action is taken on extending the payroll tax cut, the survey said.

The survey’s barometer of current economic conditions rose to 79.6 points from 77.6, while the survey’s gauge of consumer expectations gained to 63.6 points, from 55.4. All three indexes were at their highest level since June.

“I think it’s a reflection of improving job statistics, we’re seeing an increase in retail sales and even housing seems to be going up,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. “A lot of the key bookends of our economy appear to be really strengthening and that’s supporting confidence.”

LEADING INDICATORS A report released Thursday by the Conference Board suggested that economic momentum could increase by spring.

The private firm’s Leading Economic Index rose 0.5 percent in November to 118 points, following a 0.9 percent increase in October. It was the seventh consecutive monthly gain in the index.

“The risk of an economic downturn in the near term has receded,” said Ataman Ozyildirim, an economist at the Conference Board.

Ken Goldstein, another Conference Board economist, said the index suggested the economy could pick up steam by spring.

Analysts polled by Reuters had expected the index to rise 0.3 percent in November.

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Economy Shows Some Positive Signs

While other data on Thursday showed that industrial output shrank for the first time in seven months in November, much of the decline came from auto production, which analysts said had been held back by temporary supply disruptions.

“It looks like we have just hit a clear patch on the road to recovery, where things are going to speed up a little bit,” said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, N.C.

Although growth is quickening from the third quarter’s 2 percent annual rate, analysts cautioned that troubles in debt-stricken Europe pose a major risk to the economy in the United States. The fourth quarter growth rate is expected to top 3 percent.

Much of the rest of the global economy is already weakening, with the euro zone — the 17 nations in the European Union that use the euro — expected to slip into recession.

In the United States, initial claims for state unemployment benefits dropped 19,000 to 366,000, the lowest since May 2008, the Labor Department said. That follows a report earlier this month that showed the jobless rate hit a 2 1/2-year low of 8.6 percent in November.

The economy’s firming tone was also emphasized by data showing an acceleration in factory activity in New York state and the mid-Atlantic region this month.

The Philadelphia Federal Reserve Bank said its index of business conditions rose to its highest level since March as new orders surged. A separate report showed business activity in New York state at its highest since May, with a strong rebound in new orders and an improvement in hiring.

But the Fed’s industrial production report took some of the shine off the two regional factory surveys. Output at the nation’s mines, factories and refineries dropped 0.2 percent in November after rising 0.7 percent in October.

The decline was led by a 0.4 percent drop in factory output, which reflected a 3.4 percent slump in motor vehicle production.

Economists, however, blamed a scarcity of auto parts from flood-ravaged Thailand for the weakness. They said it also most likely weighed on production of high-technology goods, which were down sharply for a third consecutive month.

“We are not worried about the health of the manufacturing sector,” said Michelle Girard, a senior economist at RBS in Stamford, Conn.

“Inventories are lean and firms will likely need to restock after a decent holiday season. Automakers also plan healthy production increases in the first quarter,” she said.

FedEx on Thursday provided a further signal the economy was gaining momentum, saying demand for residential delivery services was rising with “healthy growth” in online shopping.

Honeywell International, the maker of products ranging from cockpit electronics to control systems for large buildings, also struck an upbeat note on the economy and predicted strong sales growth next year.

Another report from the Labor Department showed wholesale prices rose 0.3 percent last month, reversing October’s 0.3 percent fall, as food prices climbed 1 percent. Excluding food and energy, producer prices were up a mild 0.1 percent.

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