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Euro unemployment spikes to record 10.8 percent

By Pan Pylas,

LONDON — Unemployment in the 17 countries that use the euro hit its highest level since the currency was introduced back in 1999, official figures showed Monday, adding to fears that the region is in recession.

Eurostat, the European Union’s statistics office, said unemployment in the euro zone rose to 10.8 percent in February from 10.7 percent the previous month. The number of unemployed totaled 17.1 million, nearly 1.5 million higher than the same month a year ago. Of the 17 countries in the euro zone, seven countries had unemployment rates of above 10 percent.

The figures stand in marked contrast to the United States — with an unemployment rate of 8.3 percent — which has recorded solid increases in the number of people finding work during the past few months.

The eighth straight month of rising unemployment will likely reinforce concerns that the euro zone is in recession just as many countries pursue austerity measures to get a handle on their crippling debt loads.

Spain, whose government announced another raft of austerity measures Friday, had a rate of 23.6 percent, the highest unemployment rate in the euro zone, with youth unemployment — those under 25 years of age — standing at 50.5 percent. The lowest rate among the euro countries was Austria’s 4.2 percent. Greece, Portugal and Ireland — the three countries that have already received a debt bailout — had unemployment rates of 21 percent, 15 percent and 14.7 percent, respectively.

With unemployment rising at a time of austerity, consumers have been reluctant to spend, and that’s been holding back the euro zone economy despite signs of life elsewhere, notably in the United States and in emerging markets.

“Soaring unemployment is clearly adding to the pressure on household incomes from aggressive fiscal tightening in the region’s periphery,” said Jennifer McKeown, senior European economist at Capital Economics.

She warned that the situation is likely to get worse and that even in Germany, where unemployment held at 5.7 percent, “survey measures of hiring point to a downturn to come.”

Figures earlier indicating a bigger-than-anticipated downturn in manufacturing only added to the gloom surrounding the euro zone economy. Financial information company Markit said its purchasing managers index — a gauge of business activity — fell to a three-month low of 47.7 in March from the previous month’s 49 — anything below 50 indicates a contraction.

Markit said Germany and France, the euro zone’s two powerhouse economies, saw activity levels deteriorate. France, in particular, fared worse with activity at a 33-month low of 46.7. Only Austria and Ireland saw output increase during the month.

Across the euro zone, Markit said, new orders contracted at a faster rate than in February and that led to further job losses.

The manufacturing sector is vital for Europe’s economic growth at a time when many countries are implementing austerity measures to get a handle on their debts.

Following a 0.3 percent quarterly contraction in the euro zone’s economy in the fourth quarter of 2011, analysts said the manufacturing data show that the region is more likely to fall back into recession — technically defined as two quarters of negative growth.

“It looks odds-on that euro-zone GDP contracted again in the first quarter of 2012 .... thereby moving into recession,” said Howard Archer, chief European economist at IHS Global Insight. “And the prospects for the second quarter of 2012 currently hardly look rosy.”

— Associated Press

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