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.

Article source: http://www.nytimes.com/2013/04/03/business/global/unemployment-in-euro-zone-reaches-a-record-high-of-12-percent.html?partner=rss&emc=rss