News Column

Eurozone Unemployment Hits New Record, but Inflation Tumbles

November 30, 2012

Alexandra Mayer-Hohdahl


The crisis-battered eurozone received a bag of mixed economic news on Friday, with unemployment reaching another record of 11.7 per cent in October, but inflation dipping down to 2.2 per cent in November - its lowest point in almost two years.

Many analysts expect inflation to fall below 2 per cent next year, with ING's Peter Vanden Houte pointing to "stabilizing energy prices and weak domestic demand." Unemployment also plays a role.

"High unemployment, which should only reach its peak in early 2014, will continue to dampen wage increases," Commerzbank analyst Christoph Weil noted. "In the coming two years, the inflation rate should remain under 2 per cent."

The European Central Bank (ECB) has an annual target of just under 2 per cent. However, inflation has stubbornly remained above that goal since December 2010, reaching a high of 3 per cent in late 2011.

In October, it had stood at 2.5 per cent. The drop in November to an estimated 2.2 per cent - which exceeded analysts' expectations - came on the back of easing inflation in energy prices, according to Eurostat, the European Union's statistics agency.

"For the time being, inflation is clearly not an issue," BNP Paribas analyst Clemente De Lucia said.

Unemployment, however, continues to plague the 17-member eurozone, with many analysts believing it will go up further as the currency bloc struggles to get a handle on its debt crisis.

Another 173,000 people joined the jobless ranks in October, bringing the number of unemployed people in the eurozone to 18.7 million - 2.2 million more than a year earlier - according to new Eurostat data.

"The level of unemployment in Europe remains unacceptably high," European Commission spokesman Jonathan Todd said in Brussels.

The EU's executive is set to present next week a proposal for all of its 27 member states to offer so-called youth guarantees, which would ensure that young people are offered jobs, training or more education in the four months after they leave school or lose a job.

The jobless ranks in the eurozone in October included 3.6 million people under the age of 25, leading to a youth unemployment rate of 23.9 per cent.

The numbers remain the worst in Greece and Spain, with both posting youth unemployment rates above 55 per cent.

The two countries also recorded the highest overall unemployment rates - 26.2 per cent for Spain in October and 25.4 per cent for Greece in August, the most recent available figure for that country.

The lowest rates were in Austria (4.3 per cent), Luxembourg (5.1 per cent), Germany (5.4 per cent) and the Netherlands (5.5 per cent).

"The situations ... in member states are diverging more than ever," Todd noted. "This is precisely why member states should urgently ... create more dynamic labour markets and support the creation of more sustainable jobs."

"The critical unemployment situation also demonstrates the need to end the current economic crisis and give priority to job creation," he added.

In the wider 27-member EU, the overall joblessness rate rose to 10.7 per cent in October, after another 204,000 people became unemployed, pushing the total to 25.9 million people.

The new Eurostat data came barely a week before the ECB's governing council holds its monthly meeting. Vanden Houte predicted that the fall in inflation would allow it to continue conducting "a very loose monetary policy."

Source: Copyright 2012 dpa Deutsche Presse-Agentur GmbH

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