Unemployment in the 16-nation Euro zone remained at 9.8% in October after being revised higher to that level in September (from 9.7 to 9.8%), according to the European Union statistics office in Luxembourg said today. This is the highest rate since December 1998.
But in spite of the bad news Europe’s service and manufacturing industries expanded at the fastest pace in two years in November suggesting the economy is gathering strength.
“We’ll see further gains in the jobless rate over the coming months despite a recovery” said Juergen Michels, chief Euro-region economist at Citigroup in London. “Unemployment will peak around 10.7% in the second half of 2010.”
In Germany, Europe’s largest economy, the jobless rate declined to 8.1% from 8.2% in October which means 3.42 million are unemployed, according to the German Federal Labour Agency.
Eurostat said the lowest October unemployment rate in the Euro-zone was the 3.7% recorded in the Netherlands and 4.7% in Austria while the highest was Spain's massive 19.3%.
For the 27-nation EU as a whole, which includes non-Euro members such as Britain and Sweden, the unemployment rate rose by 0.1 percentage point to 9.3% in October after another 258,000 joined the ranks of the unemployed. The highest unemployment rate in the EU was Latvia's 20.9%.
The scale of the recession damage is evident in the annual comparisons: since October last year, unemployment in the EU has surged by a massive 5 million and by 3.15 million in the Euro-zone. The number of unemployed people in the Euro region rose by 134.000 to 15.57 million in October, the statistics office said.
Meanwhile it was reported that the Euro-area economy grew 0.4% in the third quarter after governments spent billions of Euros on stimulus packages and the European Central Bank cut borrowing costs to a record low.
However the Euro’s 20% appreciation against the US dollar since mid- February is threatening to curb the recovery by making European goods less competitive abroad. The Euro is trading above the 1.50 US dollars benchmark.
“Rising unemployment rates cast a long shadow over growth prospects” according to ECB council member Erkki Liikanen. “Against this background, the measures taken by central banks and governments to support growth rightly remain fully in place.”
But with increased unemployment undermining consumer spending, ECB policy makers may struggle to find the right time to withdraw stimulus measures without undermining the recovery or stoking inflation.
ECB council member Axel Weber said last week that it is “now time to start thinking more intensely about the next step in tackling the crisis,” including an exit plan.