EU jobless figures reach euro-era high of 10.7%

Fri, Mar 2, 2012, 00:00

UNEMPLOYMENT IN the euro zone unexpectedly hit 10.7 per cent in January, its highest rate since the euro was established in 1999, while inflation pushed beyond the European Central Bank’s target, official figures show.

The increase reported by Eurostat, the EU’s statistics office, was much more than expected. The consensus in the markets was for the rate to remain unchanged at December’s previously reported rate of 10.4 per cent. Instead, December’s rate was revised upward to 10.6 per cent.

Europe’s unemployment rate has been steadily rising all year as the wider economy wanes in the face of a protracted debt crisis that has meant widespread austerity measures being pursued across the single currency zone.

Spain had the highest unemployment rate in the euro zone at a massive 23.3 per cent, while Greece’s rate had edged up to 19.9 per cent in December.

The statistics office also revealed that inflation across the euro zone rose in February to 2.7 per cent from 2.6 per cent the previous month.

Again, the increase was unexpected – the markets had been pricing in no change from January – and takes inflation further above the European Central Bank’s target of keeping price rises at just below 2 per cent.

The ECB holds its monthly policy meeting next week and all expectations are that it will keep its benchmark rate unchanged at the record low of 1 per cent, especially after its massive injection of cash into the banking system on Wednesday.

The euro was little affected by the news and was trading flat at €1.3335.

Oil climbed for a second day as the US increased pressure on Iran to halt its nuclear programme, and improving economic data bolstered optimism that fuel demand will grow.

Futures in New York rose by as much as 1.3 per cent as US officials escalated their warnings that the nation may join Israel in attacking Iran.

The number of Americans filing first-time claims for jobless benefits fell to a level matching a four-year low.

The Federal Reserve said that the housing market has shown improvement. – (PA, Bloomberg)