Friday 20 October 2017

Europe jobless rate unexpectedly rises

Simone Meier

Europe’s unemployment rate unexpectedly increased to the highest in more than 11 years in November as companies cut costs in the wake of the worst recession in more than six decades.

Unemployment in the 16 countries which use the euro rose to 10pc from a revised 9.9pc in October, the EU statistics office in Luxembourg said today. That’s the highest since August 1998.

Economists forecast a November rate of 9.9pc after the 9.8pc initially reported for October, a Bloomberg survey showed. The euro-area economy expanded 0.4pc in the third quarter from the previous three months, according to a separate report.

European companies are cutting jobs and paring wages to help shore up earnings battered by the global slump. While economic confidence has risen to a level last seen before the 2008 demise of Lehman Brothers, a surge in energy costs and a stronger euro are threatening to damp the recovery.

“Employment is falling and wage growth is starting to adjust to the high levels of labor-market slack,” said Nick Kounis, chief European economist at Fortis Bank Nederland NV in Amsterdam. “Labour market adjustment has further to go” and household spending will “remain weak for an extended period. This is one reason for a low-speed economic recovery.”

The euro-area economy returned to growth in the third quarter after governments spent billions of euros on stimulus programs to bolster spending. Still, corporate investment fell 0.8pc in the quarter and consumer spending dropped 0.1pc, today’s data showed.

The European Central Bank (ECB) last month kept borrowing costs at a record low and said it will exit some unconventional measures as the recovery progresses.

Short-term work

In Germany, Europe’s largest economy, unemployment unexpectedly declined in December, keeping the jobless rate at 8.1pc.

German Chancellor Angela Merkel’s Cabinet extended the so-called short-term work program for a year from this month, allowing companies to continue tapping federal aid to help pay wages. As many as 140,000 people were on short-term work last month, the Federal Labour Agency said on January 5.

With a 94pc surge in oil prices over the past year threatening to crimp earnings and the euro’s 5.2pc ascent against the dollar over the same period making exports less competitive, companies may remain reluctant to add workers.

At 19.4 percent, Spain had the highest unemployment rate in November among the 16 countries using the euro, today’s report showed. Austria and the Netherlands had the lowest jobless rates with 5.5pc and 3.9pc, respectively. The number of unemployed people rose by 102,000 to 15.7 million from October, the statistics office said.

Euro-region gross domestic product declined 4pc from a year earlier in the third quarter, instead of a previously reported drop of 4.1pc, today’s data showed.

Bloomberg

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