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Economy

Euro area unemployment rate stabilises, but still high

European Commission says region on path to recovery even as it launches plan to prepare for future, reports Team IFM Brussels, May 6: Unemployment rate in the euro region, though still high, is stabilising on the back of a gradual economic recovery, fresh data released last week said, even as the authorities announced on Monday the launch of a long-term programme to stoke growth and...

European Commission says region on path to recovery even as it launches plan to prepare for future, reports Team IFM

Brussels, May 6: Unemployment rate in the euro region, though still high, is stabilising on the back of a gradual economic recovery, fresh data released last week said, even as the authorities announced on Monday the launch of a long-term programme to stoke growth and fan job creation.

Eurostat, the statistical office of the European Union, said the seasonally-adjusted spring unemployment rate in euro area1, made up of 18 nations using the euro, was 11.8 percent in March, “stable” since December 2013 but down from 12 percent during a year-ago period.

The data office also said the 28 nations comprising  the EU28 saw its unemployment rate ease somewhat on a year-on-year basis, and was 10.5 percent this March, stable compared with February but down from the 10.9 percent in March 2013.

“The recovery has now taken hold,” said Siim Kallas, the commission’s vice president. “Deficits have declined, investment is rebounding and importantly, the employment situation has started improving,” he said.

The forecast says the unemployment rate would remain stable at 10.5 percent this year but come down considerably to 10.1 percent in the coming year. Los Angeles Times compared the scenario with that in the US, one of Europe’s main sources of imports, where the unemployment rate dropped to 6.3 percent in April or the lowest level in more than five years.

But economy tracker Markit says things were improving, and took note of the economic upswing. “April saw a broadening of the recovery, with PMI readings for all of the nations for which data are collected above the 50.0 mark that divides expansion from contraction for the first time since November 2007,” it said in a report released on Monday.

Levels of output and new business also increased across all of the nations, while the pace of new order growth tested capacity at a number of euro zone manufacturers, it said. This, according to Markit, has led to an accumulation of backlogs of work for the seventh successive month in April.

“With both new business and outstanding work rising further, companies increased employment for the fourth straight month and at the fastest pace since August 2011,” Markit said.

JOB SCENARIO

On Monday, the European Commission also launched a public consultation on the Europe 2020 strategy, the EU’s long-term growth and jobs plan.

The consultation will be open until October 31, and through it, it plans to seek the views of interested people and organisations on the Europe 2020 strategy, launched in 2010, against the background of an unprecedented crisis.

It sets out a vision for smart, sustainable and inclusive growth for Europe by 2020, based on five headline targets including having at least 75 percent of people aged 20-64 in employment by 2020.

At the moment, European officials see an improvement on the horizon. According to Eurostat data, the region was poised for a stronger economic growth this year.

Eurostat’s spring forecast pegged the growth of the 28-nation European Union  at 1.6 percent in 2014, in contrast to the negligible 0.1 percent growth it registered in 2013. Moreover, the European Commission said, growth would rise to 2 percent next year, prompting Commission official Kallas to declare “recovery has now taken hold”.

When compared to the situation in February, the data office said, the number of unemployed people in March decreased by 66,000 in the EU28 and by 22,000 in the euro area. Compared with March 2013, unemployment decreased by 929,000 in the EU28 and by 316,000 in the euro area.

Currently, Eurostat estimates, 25.699 million men and women in the EU28 – who included 18.9 million in the euro area – were unemployed in March 2014.

Among the member states, the lowest unemployment rates were recorded in Austria (4.9 percent), Germany (5.1 percent) and Luxembourg (6.1 percent), and the highest in Greece (26.7 percent in January) and Spain (25.3 percent).

Compared with a year ago, Eurostat said, the unemployment rate increased in 10 member states, remained stable in three and fell in 15.

The highest increases were registered in Cyprus (14.8-17.4 percent), the Netherlands (6.4-7.2 percent), Italy (12-12.7 percent) and Croatia (16.6-17.3 percent).

The largest decreases were recorded in Hungary (11.2-7.9 percent between February 2013 and February 2014), Latvia (13.9-11.6 percent between the fourth quarters of 2012 and 2013), Portugal (17.4-15.2 percent) and Ireland (13.7-11.8 percent).

In March 2014, 5.34 million young persons (under 25) were unemployed in the EU28, of whom 3.43 million were in the euro area, Eurostat said.

Compared with March 2013, youth unemployment decreased by 322,000 in the EU28 and by166 000 in the euro area.

In percentage terms, this category of unemployment rate was 22.8 percent in the EU28 and 23.7 percent in the euro area, compared with 23.5 percent and 24 percent respectively in the year-ago period.

Moreover, the lowest rates were observed in Germany (7.8 percent), Austria (9.5 percent) and the Netherlands (11.3 percent), and were the highest in Greece (56.8 percent in January 2014), Spain (53.9 percent) and Croatia (49 percent in the first quarter of 2014).

ECONOMIC RECOVERY

Markit attributed the check on unemployment to the upturn in economy, particularly the euro zone manufacturing sector that gained traction in April.

The final seasonally adjusted Markit Euro Zone Manufacturing PMI – a gauge of the economic health of the region – rose to a three-month high of 53.4, up from 53 in March and the flash estimate of 53.3. The PMI has signalled expansion for 10 successive months, it noted.

Rates of job creation accelerated in Germany, Italy and Spain, and stabilised in Ireland and Austria, while the Netherlands and Greece also reported slight increases to payroll numbers following declines in the prior survey month. A slight cut to headcounts was implemented in France, however, reversing the slight gain registered in March – the first rise in two years.

“The euro zone PMI paints a promising picture for the region’s manufacturers at the start of the second quarter,” said Chris Williamson, Chief Economist at Markit.

“It remains to be seen is whether this strengthening of demand will feed through to more pricing power, which remains weak due to the widespread existence of spare capacity and high unemployment in many countries.”

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