Eurozone Unemployment Rate Hits 14-year High Amid Faltering Growth

on April 02 2012 10:33 AM
Riot Police stand in front of a burning barricade during Spain's general strike in Gijon
Riot Police stand in front of a burning barricade during Spain's general strike in Gijon REUTERS

The unemployment rate in the eurozone increased to its highest level in 14 years in February, as the region’s faltering economic growth left more than 17 million people jobless in the month.

The jobless rate in the 17-nation eurozone rose by 0.1 percent to 10.8 percent in February month-on-month, Eurostat said on Monday.

“It is clear that growth is not solid enough in the euro area to prevent a continued rise in unemployment rates,” said a note from Societe Generale Cross Asset Research.

With Spain recording the highest jobless rate at 23.6 percent in the region, unemployment rates in other debt-stricken nations such as Greece, Portugal and Ireland stood at 21 percent, 15 percent and 14.7 percent respectively.

“It is difficult not to see the vicious circle that is taking place in peripheral countries, where austerity packages trigger recession and rising unemployment. Unemployment is then one of the main reasons why fiscal targets are missed (lower contributions and higher benefit expenditures). This eventually generates renewed calls forausterity as well as risks of social tension,” said Societe Generale.

Separately, the data from Markit Economics showed that the final estimate of euroarea manufacturing Purchasing Managers' Index (PMI) for March remained unchanged at 47.7 from the flash estimate.

“The March final euro area manufacturing PMI was unchanged from the flash estimate at 47.7 As such, this suggests that manufacturing output is in recession territory. The report only served to heap more bad news on Spain and to raise questions on France,” said the note.

Spanish manufacturing output dropped by 0.5 points to 44.5 in March, reflecting the impact of the crisis on the growth of the nation. Surprisingly, France recorded a drop in its PMI index, revised down by one point to 46.7 percent from the initial estimate.

“This is the lowest level since June 2009 and, at face value, it suggests a significant downturn in France. The fall in manufacturing output did not come as a surprise but the size of fall did,” said Societe Generale.

Meanwhile, the European Central Bank (ECB) will hold its monthly meeting on Wednesday, and it is expected to keep rates unchanged at 1 percent despite worsening economic data, as the continued rise in oil prices likely to keep the inflation rate in the region above the central bank's target of 2 percent.

However, the UK manufacturing PMI rose its highest level in ten months to 52.1 in March from 51.5 in the previous month, bucking the trend in many other European nations which continue to post gloomy data.

“This is yet another piece of evidence pointing to positive GDP growth in Q1. Manufacturing outputgrowth continued to accelerate but we expect a cooling next month to reduce stocks of finished goods,” said the note.

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