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Eurozone unemployment hits record, inflation falls

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(Globalpost/GlobalPost)

Official data Friday painted a far from encouraging picture of the European economy, with unemployment running at record and "unacceptable" highs in the eurozone while inflation fell sharply, highlighting the weakness of consumer demand.

Separately, a closely followed manufacturing survey showed the eurozone remained in the doldrums for a 19th consecutive month in February, although it also noted some signs of increased export demand -- a key growth driver.

The Markit Eurozone Manufacturing Purchasing Managers Index was 47.9 points in February, unchanged from January when it hit an 11-month high, albeit one still below the 50-points boom-bust line.

The Eurostat data agency said unemployment in the 17-nation eurozone rose to a record 11.9 percent in January from 11.8 percent in December, with nearly 19 million people out of work.

That outcome makes uncomfortable reading, coming in so close already to the official forecast of 12.2 percent unemployment for this year and with the debt-laden eurozone not expected to return to growth until 2014.

Eurostat said that compared with December, some 201,000 joined the jobless queues in the eurozone in January and 222,000 in the 27-nation EU.

These figures are "unacceptable ... (they are) a tragedy for Europe," said a spokesman for EU Employment Commissioner Laszlo Andor.

Martin van Vliet at ING Bank said the data marked a "sharp acceleration from December" and meant that "an end to the labour market downturn is not yet in sight.

"Even if the eurozone economy exits from recession in due course, the labour market is likely to remain in recession for most if not all of this year," van Vliet said.

"It still looks highly probable that the eurozone unemployment rate will move well above 12 percent during 2013 and could very well near 12.5 percent," warned Howard Archer of IHS Global.

In the EU the unemployment rate edged up to 10.8 percent from 10.7 percent in December, with 26.2 million jobless.

The highest jobless rates were in bailed-out Greece, at 27 percent -- although this figure is for November -- and in struggling Spain, on 26.2 percent.

The lowest rates were Austria with 4.9 percent, and Germany and Luxembourg, both on 5.3 percent.

In January 2012, eurozone unemployment was 10.8 percent and the EU 10.1 percent, highlighting how the debt crisis and economic slump have hit the jobless numbers, especially among the under-25s.

Eurozone youth unemployment was put at 24.2 percent in January, up from 21.9 percent in January 2012. In the EU, under-25 unemployment rose to 23.6 percent from 22.4 percent.

For Greece, the youth unemployment rate in January was given as 59.4 percent, with Spain on 55.5 percent and Italy 38.7 percent.

On the eurozone inflation front, Eurostat said the rate of price increases fell to 1.8 percent in February, putting it well below the European Central Bank's target rate for the first time in more than two years.

In January, the inflation rate was 2.0 percent. The last time inflation was below this level was in November 2010 when it hit 1.9 percent. The ECB, whose first responsibility is price stability, has a long-term inflation target of close to but below 2.0 percent.

Low inflation would normally be seen as a positive, meaning price pressures are contained, but it also reflects the state of consumer demand which inevitably suffers at times of high unemployment when people worry about job security and prefer to save their money rather than spend it.

Global Economics analysts said the jobs figures "suggest that wage growth is set to weaken from already low rates of around 2.5 percent."

That may be good for inflation but it will also "add to the downward pressure on consumer spending from fiscal austerity," they wrote in a note.

On the PMI report, Markit chief economist Chris Williamson said there was "some consolation" in the fact that February at least held steady with January, suggesting the pace of the downturn has eased.

"While the manufacturing sector is likely to have again acted as a drag on the overall economy in the first quarter, causing GDP to fall for a fourth consecutive quarter, there are signs that the downturn has become less severe," Williamson said.

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http://www.globalpost.com/dispatch/news/afp/130301/eurozone-unemployment-hits-record-inflation-falls-1