Robust growth in the eurozone in the second quarter failed to dent its near-record unemployment rate, which remained flat for a fourth consecutive month in July, although prospects are brighter for the revived German economy.
The 10 per cent overall eurozone figure once again masked a chasm between the “core” economies led by Germany, which are doing well, and the “peripheral” group, such as Spain, which continues to struggle.
Germany’s seasonally adjusted unemployment rate, as measured by the European Commission’s statistical arm, remained flat at 6.9 per cent in July, below its own pre-crisis levels, though its national figures point to a small decline in joblessness.
By contrast, Spain’s unemployment rate nudged up to 20.3 per cent, the highest figure ever seen in a eurozone country since the single currency was introduced in 1999. In Spain, 41.5 per cent of young people are now looking for work, compared to 19.6 per cent across Europe.
Joblessness in Ireland also rose, from 13.3 per cent to 13.6 per cent, but fell in Portugal from 11.0 per cent to 10.8 per cent; Greece no longer releases monthly data.
Somewhere between the two extremes, France remained flat at 10 per cent and Italy fell 0.1 per cent, to 8.4 per cent.
Germany simultaneously unveiled its first estimates for August unemployment, which showed a continuing slow but steady decline, with a seasonally-adjusted drop of 17,000 to 3.19m, leaving the jobless rate constant at 7.6 per cent.
The figure was greeted by economic analysts as confirmation of the resilience of the export-driven German economic recovery, although they continue to expect slower growth figures towards the end of the year.
Unemployment has been falling in Germany, the largest economy in the eurozone, for over a year. Compared with August 2009, the latest figure is down by 283,000, as German employers have stepped up recruitment and cut back on the number of workers whose working hours had been temporarily reduced.
Several economists expressed the hope that the positive figures from the German labour market would herald a revival of domestic demand to complement the rapid recovery in exports.
Business confidence rose to its highest level in August for more than three years, while consumer confidence was also increasingly positive.
“It is not only the drop in unemployment which bodes well for private consumption, but also job creation,” Carsten Brzeski of ING Financial Markets told Reuters. He said that the impressive performance of the labour market would only become “a real success story” if it led to a pick-up in private consumption. “All ingredients are in place for this to happen now,” he said.
Economists expect eurozone unemployment to peak in the coming months as labour market measures designed to stimulate the economy during the downturn start to be withdrawn.
Some are warning that the spurt of growth experienced in the second quarter – at 1 per cent, much higher than had been expected – will not automatically feed through to lower unemployment.
“The pick-up in eurozone economic activity since early-2010 is clearly feeding through to help the labour market,” says Howard Archer of IHS Global Insight, a consultancy. “However, there remains a substantial risk that eurozone unemployment will rise again later in 2010 and during 2011.”
