Unemployment in eurozone at record 12.1 per cent in May
A young homeless person sleeps under an arcade of a closed bank, in Milan, Italy, Thursday, June 27, 2013. (AP / Luca Bruno)
Pan Pylas, The Associated Press
Published Monday, July 1, 2013 7:23AM EDT
Last Updated Monday, July 1, 2013 11:09AM EDT
LONDON -- Unemployment across the 17 European Union countries that use the euro hit another all-time high in May, official data showed Monday.
Eurostat, the EU's statistics office, said the eurozone's unemployment rate rose 0.1 percentage point in May to 12.1 per cent. April's unemployment rate was initially estimated to be 12.2 per cent, but it was revised down to 12.0 per cent thanks to new data, particularly from France.
The figures will make sobering reading for the region's politicians as they gather in Berlin this week to tackle the problem of youth unemployment -- nearly one in four people aged under-25 are out of work -- and the damage it is doing to the eurozone's economy and social fabric.
Across the eurozone, there were 19.22 million people unemployed, 67,000 higher than the previous month -- a closer look at the figures show that Italy was largely behind the increase.
Even though the monthly rises outside of Italy were relatively modest, analysts still expect unemployment in the eurozone to continue to rise as the region remains stuck in recession that started in late 2011.
Figures next month will show whether the eurozone continued to shrink in the second quarter of the year for the seventh quarter in a row. Even if the region escapes the grip of recession, unemployment is likely to carry on rising for a while as the labour market is a lagging indicator of economic activity. In the U.S., for example, unemployment didn't really start falling until a couple of years after the end of the recession there in 2009. In May, the U.S. rate was 7.6 per cent.
Most economists think it will be a close call whether the eurozone's recession comes to an end this quarter. While countries such as Germany and Austria have seen their economies prosper and their unemployment rates dropping in May to 5.3 per cent and 4.7 per cent respectively, those at the forefront of Europe's debt crisis, such as Greece and Spain, continue to see economic contraction and job losses on a massive scale.
These countries have suffered wave after wave of austerity measures in order to get their public finances back into shape following the financial crisis that hit the world economy in 2008/9.
Greece and Spain also have the highest unemployment rates in the eurozone. Spain's unemployment is just higher at 26.9 per cent than Greece's rate in March -- its statistics are compiled on different timeframes -- of 26.8 per cent.
Both countries are also mired in a youth unemployment crisis. Whereas the youth unemployment rate for the 17-country eurozone as a whole is 23.8 per cent, the proportion of Spain's 15-24 year olds out of work is 56.5 per cent while Greece's stands at 59.2 per cent. By contrast, it is 16.3 per cent in the U.S., where the age range is 16-24.
Over recent months, policymakers across Europe have at least paid lip-service to the amount of young people out of work.
As well as being a burden to a country's coffers, sky-high levels of youth unemployment have an additional social cost of denying potential workers skills and experience -- that's a long-term cost to the region's economic potential as well as inflaming social tensions.
German Chancellor Angela Merkel is hosting a meeting of EU labour ministers on Wednesday as part of a strategy to deal with the youth unemployment crisis, but there's very little hope that the EU as a whole will deliver anything substantial to deal with the issue.
Anna Zabrodzka, economist at Moody's Analytics, said the labour market in Europe is heavily skewed against younger people.
"Most EU nations effectively have dual labour markets, with permanent jobs typically protected by unions and held by people older than 35, and temporary jobs that are unprotected and held by younger workers," she said.
And a 6 billion euro ($7.8 billion) EU plan to tackle youth unemployment, confirmed at a leaders' summit in Brussels last week, was described as a "drop in the ocean" by the European Parliament's president Martin Schulz.
Neil Mellor, an analyst at Bank of New York Mellon, said the plan to promote workplace programs and help job seekers find work was insufficient to deal with a crisis of "endemic proportions" given the region's parlous economic situation.
"Reform is indeed essential, but as we have argued, this goes to the heart of the chicken-and-egg debate over its feasibility without first stimulating growth," Mellor said.
Elsewhere, Eurostat said inflation picked up to 1.6 per cent in the year to June, up from 1.4 per cent the previous month. Higher food, alcohol and tobacco costs and unfavourable annual energy comparisons lay behind the increase in inflation.
The increase is unlikely to cause too much concern among policymakers at the European Central Bank, as the rate remains below its target of keeping price increases just below 2 per cent.
The ECB is meeting this Thursday to decide what more it can do to shore up the eurozone's economy. However, a reduction in the main interest rate, which stands at a record low of 0.5 per cent, is not anticipated.