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Eurozone unemployment hits new record in May
Question of the Day
LONDON — Unemployment in the 17-country euro currency bloc hit another record in May as the crippling financial crisis pushed the continent toward the brink of recession, official figures showed Monday.
Eurostat, the EU’s statistics office, said unemployment rose to 11.1 percent in May from 11 percent the previous month. May’s rate was the highest since the euro was launched in 1999 and adds further urgency to the eurozone countries’ plan to create economic growth and cut excessive government debt.
At a summit last Friday, eurozone leaders agreed to a limited economic growth package as well as measures to boost confidence in financial markets. Those include allowing Europe’s bailout fund to rescue banks directly, without adding to government debt, and not requesting painful new austerity measures in return for sovereign bailouts.
Investors cheered the summit’s outcome, triggering a stock market rally which, if sustained, should help buoy economic confidence in the eurozone — a key step to easing the crisis.
But the unemployment data highlighted the extent of the challenge facing European leaders.
May’s unemployment rate compares badly with an unemployment rate of 8.2 percent in the United States and 4.4 percent in Japan, and is expected to rise further in the coming months as the eurozone economy is forecast to slide back into recession this year.
Six countries in the eurozone, including Spain and Italy, are in recession — technically defined as two consecutive quarters of economic contraction. However, strong growth in Germany has prevented the eurozone as a whole from falling into recession. In the first quarter, the eurozone economy stagnated. Many economists think it will contract in the second and third quarters, putting it back into recession.
In total, 17.6 million people were out of work in the eurozone in May, up 88,000 on the month before and 1.8 million more than the level a year earlier.
Unemployment has been edging higher since May 2011, when it was 9.9 percent, as concerns over the debt crisis and the future of the euro currency have weighed on economic activity. Businesses have been cutting jobs or delaying hiring as confidence in the economy waned, while many governments have pursued austerity programs, including big job reductions in the public sector.
There are huge disparities across the eurozone, however, with those countries at the front line of the debt crisis suffering most.
The highest unemployment rate across the eurozone was recorded in Spain, where 24.6 percent of people were out of work in May. Joblessness there has ballooned since the country’s once-booming real estate sector collapsed in 2008. The government’s recent efforts to cut debt by slashing public sector jobs and spending has made matters worse.
Dramatically, 52.1 percent of the country’s youth were unemployed. Greece’s youth unemployment rate also stands at 52.1 percent at last count in March.
“EU policymakers and stakeholders are aware of this potential catastrophe of creating a lost generation, but so far appear powerless to halt the rising jobless figures among young people,” said Andrea Broughton, principal research fellow at the Institute for Employment Studies in London.
“This is a huge problem to tackle, but it is essential that young people are encouraged to develop skills that are in demand and that they are given the chance to obtain meaningful work experience that enables them to gain a foothold in the labour market,” Broughton added.
Other countries in the eurozone, particularly those in the north, are faring better. Germany’s unemployment rate stood at only 5.6 percent. And its youth unemployment rate stood at only 7.9 percent, markedly lower than the more than one in two unemployed in both Greece and Spain.
However, a raft of economic indicators in recent weeks have shown that Europe’s biggest economy is not immune to the problems in the rest of the region. Germany’s exports to other countries in the eurozone are under pressure and business confidence is waning.
Across the wider 27-country European Union, which includes non-euro countries such as Britain and Poland, unemployment edged up to 10.3 percent in May from 10.2 percent the month before.
By Andrew P. Napolitano
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