Eurozone unemployment hits record high

The recession in the eurozone pushed unemployment in the region up to a record 11.7 per cent in October.
A woman walks past a homeless man sleeping in front of a closed shop in central Athens earlier this year. Greece's unemployment rate is over 25 per cent. (John Kolesidis/Reuters)

Another month, another record unemployment rate for the economy of the 17 EU countries that use the euro.

Figures released Friday from Eurostat, the European Union's statistics office, showed that the recession in the eurozone pushed unemployment in the region up to 11.7 per cent in October.

The previous record of 11.6 per cent in September was anticipated in light of the eurozone's return to recession in the third quarter, commonly defined as two consecutive quarters of negative growth. 

While the eurozone's unemployment has been inching upward since June 2011, the equivalent rate in the U.S. has fallen to below eight per cent as the world's largest economy continues its recovery from recession.

Eurostat found 18.7 million people were out of work across the eurozone, an increase of 173,000 on the previous month. 

Greek youth unemployment near 60 per cent

Spain and Greece have the region's highest unemployment rates — both over 25 per cent, with youth unemployment levels heading towards 60 per cent, a potentially toxic long-term economic and political development.

Both countries are in recession and struggling to convince markets as well as their own people that they can get a grip on their debts to improve living standards further down the line. Both, along with a number of euro countries, have introduced tough austerity measures, such as cutting spending and raising taxes, in order to get a handle on their debts. 

However, reducing wages and pensions lowers demand in the economy to the detriment of the labour force.

Other measures taken alongside the austerity, such as reforming labour practices, are intended to promote jobs but they take time, both to enact and to feed through an economy.

That's why many economists think that unemployment in many countries will likely carry on rising for a while yet, certainly as long as they remain in recession. 

"Labour market conditions in the single currency area are clearly deteriorating and survey indicators of employment intentions point to worse to come," said Jonathan Loynes, chief European economist at Capital Economics.

At present, the five euro countries at the forefront of the debt crisis — Greece, Spain, Italy, Cyprus and Portugal — are in recession.

Others, like the Netherlands and Austria — neither of which is particularly debt-laden — could officially fall into recession too after posting declines in third-quarter economic output. Austria has the lowest unemployment rate in the eurozone of 4.3 per cent.

The eurozone's powerhouse economies, such as Germany and France, have also seen growth levels fall in the last year and that's ratcheting up the pressure on businesses to cut costs. Germany's unemployment rate stood at a still-low 5.4 per cent in October, but France's was nearly double that at 10.7 per cent.

Some respite came with the news that inflation in the eurozone fell by more than anticipated to 2.2 per cent in November from 2.5 per cent the previous month. 

Since it was a preliminary estimate, Eurostat gave no reasons behind the decline but waning labor market pressures to lift wages are likely to have been, at least partially, behind the fall.

Despite the decline, inflation is still above the European Central Bank's target of keeping price rises at just below two per cent. Few economists think the ECB will cut its main interest rate from the current record low of 0.75 per cent at its monthly policy meeting next Thursday.