The number of Eurozone jobless rose by 67,000 in May to reach a record 19.222 million, taking the unemployment rate up to a disturbing 12.2%.
IHS Global Insight perspective | |
Significance | May's increase of 67,000 in the number of Eurozone jobless was the largest since January, as it was up from increases of 62,000 in April, 31,000 in March and 50,000 in February. The smaller increases in March and February may well have been partly a correction after a jump of 259,000 in January, which may have been affected by particularly cold weather. |
Implications | About the only positive spin that could be put on the Eurozone unemployment data is that the rise has shown some signs of slowing overall in recent months. The increase has averaged 93,800 a month so far in 2013 compared with an overall average monthly increase of 162,200 in 2012. Eurozone unemployment has now risen for 25 successive months and by a total of 3.823 million since starting to move up in May 2011. This is putting serious pressure on consumer spending across the Eurozone, along with generally muted earnings growth and tight fiscal policies in many countries. |
Outlook | While Eurozone GDP could have finally stopped contracting in the second quarter after a record six quarters of decline, overall economic activity is likely to remain too weak through 2013, and very possibly during the early months of 2014, to prevent unemployment from rising further. Furthermore, Eurozone business confidence is generally muted and fragile compared with long-term norms, despite rising for a second month running in June after a relapse in March–April. Consequently, it looks highly probable that the Eurozone unemployment rate will reach 12.5% by the end of 2013, and there is a grave danger that it could continue rising into 2014. |
Eurozone unemployment rose by 67,000 in May. This was the largest increase since January, as the number of jobless had previously risen by 62,000 in April, 31,000 in March, and 50,000 in February. The small increases in March and February may well have been partly a correction after a jump of 259,000 in January, which was affected by particularly cold weather.
About the only positive spin that could be put on the Eurozone unemployment data is that the rise has shown some signs of slowing overall in recent months. The increase has averaged 93,800 a month so far in 2013 compared with an overall average monthly increase of 162,200 in 2012. Specifically, the number of Eurozone jobless had previously risen by 399,000 in the fourth quarter of 2012 and by 362,000 in the third quarter, which was appreciably lower than the jumps of 636,000 in the second quarter and 549,000 in the first quarter.
May's increase of 67,000 took the number of Eurozone unemployed to 19.340 million, easily the highest level since the Eurozone was formed in January 1999. Furthermore, May marked the 25th successive month that Eurozone unemployment has risen and brought the cumulative increase to 3.823 million since the number of jobless started rising in May 2011. The number of Eurozone jobless had previously fallen by 409,000 to a 19-month low of 15.517 million in April 2011, from the previous record high of 15.926 million in April 2010.
The unemployment rate remained at disturbing high levels in the struggling southern Eurozone periphery countries, although it did at least edge down in Portugal during June (to 17.6% from 17.8%) and only rose marginally in Spain (to 26.9% from 26.8%). However, there was an appreciable rise in Italy from 12.0% to 12.2%. Latest data also show a further rise in the Greek unemployment rate to 26.8% in March from 26.7% in February.
Better news saw the German unemployment rate edge down to 5.3% in June from 5.4% in May, but the jobless picture remained worrying in some of the core northern Eurozone economies as the unemployment rate rose in France (from 10.8% to 10.9%), the Netherlands (from 6.5% to 6.6%) and Belgium (from 8.5% to 8.6%).
Labour markets have suffered markedly from persistent weak Eurozone economic activity since the first quarter of 2011 and the overall substantial fall in business confidence that occurred through to October 2012. Indeed, Eurozone GDP has failed to grow since the third quarter of 2011, and contracted through 2012, including a drop of 0.6% quarter-on-quarter (q/q) in the fourth quarter. Meanwhile, overall Eurozone business confidence was at or very near its lowest level since 2009 in all of the major sectors in October 2012. This included a 39-month low among services companies and a 35-month low among industrial companies, according to a European Commission survey.
While Eurozone economic activity showed some signs of coming off its lows in late-2012/early-2013 and business confidence picked up between October 2012 and February 2013, both remained too weak to prevent Eurozone unemployment from continuing to rise. Furthermore, business confidence suffered a general relapse in March and April, while Eurozone GDP contracted for a sixth successive quarter in the first quarter of 2013, by 0.2% q/q. Although Eurozone economic activity may have finally stabilised in the second quarter and business confidence generally rose in May and June, the environment currently remains generally troubling for labour markets.
Eurozone unemployment rate up to record 12.2% in May
The Eurozone unemployment rate rose to a record 12.2% in May. This was up from 12.1 % during February–April, 12.0% in January, 11.8% at the end of 2012, 11.4% in mid-2012, and 10.7% at the end of 2011. It was also up from 10.0% in mid-2011 and a low of 9.9% in February–May 2011. The Eurozone unemployment rate had previously peaked at 10.2% in April–May 2010, after trending up to this level from a record low of 7.3% in the first quarter of 2008.
The jobless rate in individual countries during May ranged from a low of 4.7% in Austria to a high of 26.9% in Spain, according to Eurostat data, which can vary significantly from national statistics. Portugal saw an unemployment rate of 17.6%, followed by Cyprus (16.3%), Slovakia (14.2%), Ireland (13.6%), Italy (12.2%), Slovenia (11.2%), France (10.9%), Belgium (8.6%), Finland (8.4%), the Netherlands (6.6%), Malta (6.2%), Luxembourg (5.7%) and Germany (5.3%). The latest comparable data show unemployment rates of 26.8% in Greece during March and 8.3% in Estonia during April.
Employment falling
The latest survey evidence from the purchasing managers' surveys points to overall employment in the Eurozone manufacturing and services sectors falling for 18 consecutive months through to June 2013, after growing continuously between May 2010 and December 2011. Furthermore, the rate of decline picked up marginally in April–June, after moderating to a nine-month low in March, from a 37-month high in January.
Hard but more dated figures from Eurostat show that Eurozone employment fell at an increased rate of 0.5% q/q and 1.0% year-on-year (y/y) in the first quarter of 2013 to stand at 145.1 million. Employment had previously fallen by 0.3% q/q in the fourth quarter of 2012 and by 0.1% q/q in both the third and second quarters. In fact, Eurozone employment has been falling since mid-2011.
Unsurprisingly, the main weakness in employment continued to occur in the struggling southern Eurozone economies in the first quarter, with marked declines in Spain (1.3% q/q and 4.3% y/y), Portugal (2.2% q/q and 5.2% y/y), and Greece (6.5% y/y). In addition, Italian employment was down 1.2% q/q and 1.4% y/y, which was a marked pick-up from the drop of 0.5% q/q and 0.1% y/y in the fourth quarter of 2012. The falls in employment were not confined to the southern Eurozone economies in the first quarter of 2013, with declines occurring in France (0.1% q/q and 0.3% y/y), the Netherlands (0.2% q/q and 0.7% y/y), and Belgium (0.1% q/q and 0.2% y/y). In contrast, German employment kept on rising, by 0.2% q/q and 0.7% y/y.
Outlook and implications
A rise of 67,000 in the number of unemployed in May reinforces the belief that a general turnaround in Eurozone labour markets is still some way off. The situation will probably vary markedly between countries. While Eurozone GDP could have finally stopped contracting in the second quarter, after a record six quarters of decline, overall Eurozone economic activity is likely to remain far too weak through the second half of 2013, and very possibly during the early months of 2014, to prevent unemployment from rising further.
Furthermore, despite significant improvement in late-2012/early-2013, Eurozone business confidence is generally still at weak levels and it suffered a widespread relapse in both March and April, before rising anew in May and June. Meanwhile, public-sector jobs are likely to be pared in a number of countries going forward as part of the austerity measures that are increasingly being implemented.
Consequently, we suspect that firms will generally retain a very cautious approach to their employment levels for some time to come. Even those firms that do manage to generate increased business in the current difficult environment are likely to try to meet it through making greater use of the workers they have already. Significantly, the European Commission's business and consumer survey shows that near-term employment expectations remained limited compared with long-term lows in June, after generally relapsing in April and March. For example, in the services sector, the index fell back from a five-month high of -4.6 in February to a 21-month low of -6.4 in April before improving to -5.6 in June. The index is substantially below the 1990–2013 average of +5.5. The employment expectations index for manufacturing companies retreated from -10.9 in February to a 5-month low of -12.6 in April, before picking up to -11.9 in June. This is below the long-term average of -10.9. The employment expectations balance in both the retail (only up to -9.4 in June from four-month low of -9.6 in April) and construction (up to -25.8 in June from five-month low of -26.8 in May) sectors were well below their respective long-term averages of -3.7 and -10.5 in June.
We expect the Eurozone unemployment rate to rise to 12.5% by the end of 2013 and to edge up further in the early months of 2014 to peak around 12.7% by mid-year. Eurozone unemployment is seen finally starting to head down gradually in late-2014. The drop in the number of Eurozone jobless should accelerate in 2015, as business confidence and economic activity see sustained, clear improvement.