LONDON — Unemployment in the 17-country eurozone hit a record high of 11.6 percent in September, official figures showed Wednesday, a sign the economy is deteriorating as governments struggle to get a grip on their three-year debt crisis.
The rate reported by Eurostat, the EU’s
statistics office, was up from an upwardly-revised 11.5 percent in
August. In total, 18.49 million people were out of work in the eurozone
in September, up 146,000 on the previous month, the biggest increase in
three months.
While the eurozone’s unemployment rate has been
rising steadily for the past year as the economy struggled with a
financial crisis and government spending cuts, the United States has
seen its equivalent rate fall to 7.8 percent. The latest U.S. figures
are due this Friday.
With the eurozone economy fading, most
economists think unemployment will keep increasing over the coming
months. Five countries in the eurozone are already in recession —
Greece, Spain, Italy, Portugal, and Cyprus — and others are expected to
join them soon.
The region as a whole is expected to be confirmed
to be in recession when the first estimate of eurozone economic activity
in the third quarter is published mid-November — a recession is
officially confirmed after two consecutive quarters of negative growth.
“With
surveys suggesting that firms are becoming more reluctant to hire, the
eurozone unemployment rate looks set to rise further, placing more
pressure on struggling households,” said Ben May, European economist at
Capital Economics.
Recession and unemployment make it more
difficult for the eurozone to deal with its debt problem — governments
need to pay more benefits to the jobless and receive fewer tax revenues.
That could push countries to take even more austerity measures, which
in turn weighs on economic activity.
Once again, Spain held the
ignominious position of having the highest unemployment rate in the
eurozone, at 25.8 percent. Greece may yet surpass that — its
unemployment rate mushroomed to 25.1 percent in July, the latest
available figure, and is due to increase in the face of what many
economists are calling an economic depression. The country is forecast
to enter its sixth year of recession next year.
Both countries,
which are at the heart of Europe’s three-year debt crisis, have youth
unemployment above 50 percent. That risks creating a lost generation of
workers and is straining the countries’ social fabric. Extremist
political groups in Greece and regional separatist parties in Spain have
grown in popularity as the economy worsened.
Concern over the social impact of unemployment has also weakened governments and hobbled political decision-making.
In
Greece, the three parties in the coalition government have tried for
months to agree on an austerity package that is necessary for the
release of bailout loans to prevent the country’s bankruptcy.
The
lowest unemployment rate in the eurozone was Austria’s 4.4 percent.
Germany, Europe’s biggest economy, has a jobless rate of only 5.4
percent.
Separately, Eurostat reported that inflation in the
eurozone fell modestly to 2.5 percent in the year to October, from the
previous month’s 2.6 percent. Inflation is still above the European
Central Bank’s target of keeping price rises just below 2 percent.
“High
and rising unemployment, and relatively sticky inflation, does not bode
well for consumer spending across the eurozone, especially as consumers
in many countries are also facing muted wage growth and tighter fiscal
policy,” said Howard Archer, chief European economist at IHS Global
Insight.
Above-target inflation has not prevented the ECB cutting
its key interest rate to a record low of 0.75 percent, but few
economists think financially-strained consumers will get any more help
from the bank at next week’s monthly policy meeting.
