The European economy is on the mend – slowly – but you would not know that from the latest unemployment figures, which are high and rising.
On Tuesday, the European Union’s data office, Eurostat, reported record high jobless rates in the 17-country euro zone, at 11.8 per cent in November, up from 11.7 per cent in the previous month, and stable but still distressingly high in the 27-country EU, at 10.7 per cent.
The youth unemployment numbers were particularly grim. If you are under 25 and live in Spain or Greece, you are likely to be without work. The figures also showed a widening economic gap between relatively rich northern Europe, where the jobless rate is generally in single-digit territory, and the struggling Mediterranean frontier, where double-digit rates are the norm.
With austerity working is dark magic, few economists are expecting a jobs rebound or quick end to the European economic downturn (the euro zone as a whole is in recession).
Martin van Vliet, economist with ING Financial markets, said “with more fiscal austerity in the pipeline, the debt crisis still unresolved, and unemployment rising...consumers and hence businesses still have plenty to worry about. Moreover, despite the recent improvement, euro zone economic sentiment remains in recession territory.”
The youth jobless rates showed the most startling increases in both the euro zone and the wider EU. The overall jobless rate for 15 to 25-year-olds in the euro zone was 24.4 per cent, up from 21.6 per cent in November, 2012. In the EU, the rate went to 23.7 per cent from 22.2 per cent.
In Greece, youth unemployment was 57.6 per cent; in Spain, which is still suffering from housing collapse of 2007 and 2008, it was 56.5 per cent; Italy’s youth jobless rate went to 37.1 per cent from 32.2 per cent, making job creation one of the central campaign issues in the general election, to be held Feb. 24 and Feb. 25.
The youth figures should be treated with caution. The enormous size of the underground, that is un-taxed economy, in Greece, Spain, Italy and a few other countries were tax evasion is a national sport, means that some youths officially classified as jobless are in fact making money. Many of them save expenses by living with their parents.
There was more bad news in Europe Tuesday, though some good too.
On the negative front, Germany, where the unemployment rate is only 5.5 per cent, exports have been on the wane. They dropped 3.4 per cent in November, month on month, their biggest fall is more than a year. The slowing global economy and the euro zone recession are to blame. While Germany is not turning into a Spain or Italy, the falling exports indicate that the economy contracted in the fourth quarter.
On the bright side, the European Commission reported Tuesday that the economic sentiment indicator (ESI) for the euro zone was on the rise in December for the second month running, reaching its highest level since July. Consumer confidence was one of the components that rose. The only won to fall was retail confidence.
Investors reacted accordingly to the mix of encouraging and discoursing news. The European markets were essentially flat on Tuesday and the euro was down marginally. They apparently realize there is no quick cure for Europe’s woes.