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Monday, 28 January 2013
Euro Crisis Seen Reaping Social Toll With Record Jobless
By Scott Hamilton - Jan 28, 2013 12:44 PM GMT+0400
Euro-area jobless data this week will expose the social cost of last year’s debt crisis and recession on southern European economies as unemployment across the region probably rose to a record in December.
Unemployment in the 17-nation bloc climbed for a fifth month to 11.9 percent, according to the median of 34 economists’s forecasts in a Bloomberg News survey. That result due on Feb. 1 would show the highest jobless rate since records began in 1995. By contrast, German unemployment data the day before may show the jobless rate there held steady for a fourth month at 6.9 percent in January, a separate survey found.
Fran Lopez, a jobless electrician, checks his mobile phone on a street bench near his home in Madrid, Spain. Photographer: Photographer: Angel Navarrete/Bloomberg
Jan. 23 (Bloomberg) -- Spanish expatriates Carlos Hernandez Sonseca, Raquel del Rosario and Pablo Medina talk about their decisions to leave their home country and seek jobs in Britain. They spoke with Bloomberg's Carol Olona in London on Jan. 18. (Source: Bloomberg)
While measures to stem the region’s debt turmoil have helped reduce sovereign bond yields from Spain to Greece, the recession and crisis have led to job cuts by companies and governments. The European Central Bank predicts the currency bloc’s economy will shrink 0.3 percent this year and President Mario Draghi said last week that the “jury is still out” on whether investor optimism can be reflected in economic momentum.
“The worst may be over for financial markets, but definitely not for the real economy,” Marco Valli, chief euro- area economist at UniCredit Global Research in Milan, said by telephone. “The unemployment situation is going to remain very poor at least for another year, if not longer.”
The euro was trading at $1.3436 at 9:38 a.m. in Brussels, down 0.2 percent on the day. The Stoxx Europe 600 Index was little changed at 289.63.
Spanish data last week showed a record 26 percent of the workforce without jobs in the fourth quarter, bringing to the total close to 6 million people. InGreece, the rate was even higher in October, at 26.8 percent, also a record.
“Companies are still shedding labor, especially in southern Europe,” Martin Van Vliet, an economist at ING Groep NV in Amsterdam, said in an interview. “Unemployment will probably continue to trend higher in the next couple of months.”
While economists predict the German unemployment rate will stay unchanged, they still see an increase of 8,000 people without work this month from December, according to the median forecast of 31 economists in a Bloomberg news survey.
The euro-area economy has shrunk for two successive quarters and economists predict a further 0.4 percent decline in gross domestic product in the final three months of last year, according to the median of 26 estimates in a Bloomberg survey. The International Monetary Fund on Jan. 23 cut its global growth forecast and projected a second year of contraction in the euro region.
While investor confidence in Germany, Europe’s largest economy, rose to the highest in 2 1/2 years this month as debt tensions ease, high unemployment and continued austerity measures elsewhere are undermining household sentiment and spending. An index of euro-area economic confidence probably rose to the highest level since June, according to median estimate in aBloomberg News survey of 30 economists.
“We’re in the phase of financial conditions improving and markets becoming more optimistic, but that has to feed through to the real economy,” ING’s Van Vliet said.
Alongside the euro-area unemployment data, Eurostat, the European Union’s statistics office, will also release data on consumer prices for January. The inflation rate will remain at 2.2 percent, according to the median of 39 economists’ forecasts in another survey.
‘Tough’ First Half
Euro-area economic conditions will be “tough” in the first half before a wider recovery takes hold in 2014, according to Patrick de Maeseneire, chief executive officer of Adecco SA (ADEN), the world’s biggest supplier of temporary workers.
This year “is not going to be a good year,” De Maeseneire said in an interview on Jan. 25. “The first six months will be tough, especially in France, especially in southern Europe,” he said. “Germany is also slowing down, we see automotive slowing down, and that’s going to have an effect on the surrounding economies.”
PSA Peugeot Citroen (UG), Europe’s second-largest carmaker, said last month it will eliminate an additional 1,500 jobs by 2014, on top of 8,000 announced in July.
“Job shedding continues because it’s clear the euro zone economy is still in recession,” said UniCredit’s Valli. Still, “What we’re seeing right now is all the preconditions that are necessary in order to have some sort of economic improvement. Nothing in the near term, but down the road.”