European unemployment remained at the highest in almost 14 years in December, suggesting the region’s worsening debt crisis and cooling economic growth prompted companies to cut jobs.
The jobless rate in the 17-nation euro region held at 10.4 percent from the previous month, the European Union’s statistics office in Luxembourg said today. That’s the highest since April 1998 and in line with a Bloomberg News survey of economists. It had previously reported a November reading of 10.3 percent.
Europe’s rising unemployment may undermine consumer demand further as governments toughen austerity measures to fight the fiscal crisis. With global export demand cooling, companies are under pressure to reduce costs. European Central Bank council member Ewald Nowotny said yesterday that the region may fail to grow or show a “recession in certain phases” of this year.
“Crisis countries like Spain and Greece will show further increases in unemployment,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “That’s bad news for consumer demand. We expect the economy to shrink in the current quarter after a contraction in the previous three months.”
The euro was higher against the dollar, trading at $1.3197 at 10:02 a.m. in London, up 0.4 percent on the day.
In the 27-nation EU, the jobless rate held at 9.9 percent from the previous month, today’s report showed. About 16.5 million people were unemployed in the euro region, up 20,000 from November, the statistics office said.
The euro-area economy will probably expand 0.3 percent this year after growing 1.6 percent in 2011, the ECB said on Dec. 8, when cutting borrowing costs a second time in as many months. In 2013, gross domestic product may increase 1.3 percent, the Frankfurt-based central bank said.
In Germany, Europe’s largest economy, which has helped power the region’s expansion, unemployment dropped more than economists forecast in January to a two-decade low. The jobless rate declined to 6.7 percent from 6.8 percent, the Nuremberg-based Federal Labor Agency said today.
The economy may struggle to gather strength after expanding just 0.1 percent in the third quarter as governments from Ireland to Spain step up spending cuts to help restore investor confidence. Concern that the EU would break a promise not to restructure Portugal’s debt pushed 10-year yields up by 2.17 percentage points to 17.39 percent yesterday as two-year yields surged to a euro-era record.
European leaders left a Brussels summit late yesterday with no accord over how to plug Greece’s widening budget hole and German Chancellor Angela Merkel voicing frustration with the Athens government’s failure to carry out an economic makeover. The leaders agreed to speed up a full-time 500 billion-euro ($658 billion) rescue fund and signed off on a German-inspired deficit-control treaty.
With consumers holding back spending and export demand faltering, companies are looking for ways to protect earnings. Kloeckner & Co SE, Europe’s largest independent steel trader, plans to eliminate 6 percent of its 11,577 employees in a cost- cutting program to be implemented by the end of June.
Royal Philips Electronics NV, the world’s largest light bulb maker, said yesterday that it is “cautious” about prospects for 2012 after writedowns and sluggish sales helped spark its biggest loss in a decade. The Amsterdam-based company outlined a first round of headcount reductions in the Netherlands at its lighting unit on Dec. 15 as part of a bigger overhaul involving 4,500 jobs worldwide.
“We are cautious about 2012 given the uncertainty in the global economy, and Europe in particular,” Philips Chief Executive Officer Frans van Houten said in a statement. “Europe is not a great place for growth right now.”
At 22.9 percent, Spain reported the highest unemployment rate among EU states. Greece had a jobless rate of 19.2 percent in October, according to latest available figures. Austria and the Netherlands reported the lowest jobless rate with 4.1 percent and 4.9 percent, respectively.