The number of people unemployed across the 17 countries that use the euro hit a record high in June, official figures showed Tuesday, in a stark reminder that Europe's debt crisis has ramifications beyond the financial markets.
Eurostat, the EU's statistics office, said 17,801,000 people were out of work in the eurozone in June. That was 123,000 more than May, and is the highest level since the euro was formed in 1999. The increase was the 14th in a row and means that around 2.25 million people have lost their jobs since April 2011.
Despite the increase, unemployment on a seasonally adjusted basis in June was unchanged at a record 11.2 per cent, much higher than the U.S.'s equivalent 8.2 per cent and Canada's 7.2 per cent. Europe's unemployment rate for May had originally been estimated at 11.1 per cent.
"Another horrible set of labour market data for the eurozone, which bodes ill for consumer spending and growth prospects," said Howard Archer, chief European economist at IHS Global Insight.
Spain, which is at the forefront of Europe's debt crisis concerns, had the highest unemployment rate across the eurozone of 24.8 per cent. Greece's rate was not far behind at 22.5 per cent, though the latest figures available are for April. Many countries that use the euro, including France and Italy, also have double-digit unemployment rates.
Germany, Europe's biggest economy, continues to fare far better, and its unemployment rate, according to Eurostat, dropped to 5.4 per cent in June from the previous month's 5.5 per cent.
However, analysts think that even Germany will soon start to see rising unemployment rates. Figures earlier from Germany's Federal Labor Agency showed the unadjusted rate climbing from 6.6 per cent in June to 6.8 per cent in July as the typical seasonal increase of school-leavers signing on for unemployment benefits was reinforced by a gradual slowing in the labor market.
Youth unemployment tops 50% in Spain and Greece
The figures will add to the pressure on policymakers to get a grip of the debt crisis, which is impacting communities and consigning large chunks of younger people to unemployment — every other person aged under 25 in Spain and Greece is unemployed.
Hopes have risen over the past week — at least in financial markets — that Europe is preparing new measures to handle the crisis. Last week, European Central Bank president Mario Draghi said the bank "is ready to do what it takes to preserve the euro. Believe me, it will be enough."
Those comments raised expectations that, at the very least, the ECB will ramp up its bond-buying program in the hope of keeping a lid on Spanish and Italian borrowing rates. The recent sharp rise in Spain's interest rates raised concerns that the 17-country eurozone hasn't the capacity to bail out its fourth-largest economy, and raised the specter of Italy needing financial help too.
"Irrespective of what happens on Thursday and whether Draghi delivers or not, the economic data out of Europe is nothing short of woeful," said Michael Hewson, markets analyst at CMC Markets.
Eurostat revealed Tuesday that inflation was unchanged at 2.4 per cent in July. Though that remains above the ECB's mandated target of keeping price increases just below two per cent, the recent trend has been downward and analysts expect that to continue.
A waning economy and rising unemployment, which combine to keep a lid on wage increases, are expected to push inflation back below target over the coming months. Lower energy inflation is also expect to ease down on price rise pressures.
This opens the door for the ECB to cut its benchmark rate below its current record low of 0.75 per cent.