October preliminary: 10.3%

MNI survey median: 10.3%
MNI survey range: 10.2% to 10.3%

Previous: 10.2% Sep, 10.1% Aug, 10.1% Jul, 10.0% Jun, 10.0% May

PARIS (MNI) – Eurozone unemployment climbed to a new record high in
October, boosting the jobless rate to 10.3% as most analysts had
expected, according to seasonally adjusted data released Wednesday by
Eurostat.

From its previous peak in April 2010, unemployment had declined by
only 330,000 before it began mounting again a year later. October’s rise
lifted the number of jobless by 126,000 to 16.294 million.

The jobless tide is likely to swell faster in the months ahead as
activity loses momentum or begins to contract, thereby dampening
consumption and accentuating the cyclical downturn. The November PMI
polls suggested that new hiring has already ground to a halt.

Employment expectations as measured by the European Commission
eroded further in November in industry and the financial services,
though it recovered somewhat in other services and retailing. In the
latter two sectors, the upturn was driven mainly by Germany, the
recovery in Spain (services) and in Italy and the Netherlands
(retailing).

Given the cyclical lags in the services and retailing, it is
probably only a matter of time before firms begin to lighten payrolls.

The OECD expects Eurozone employment to contract by 0.3% next year,
more than retracing this year’s upturn, then recover by 0.2% in 2013.
The jobless rate would jump from an average of 9.9% this year to 10.3%
in 2012 and stabilize the following year.

“The unemployment rate will edge up, perhaps more than projected
given the limited adjustment observed in recent years during the
financial crisis,” the OECD predicted this week. It underscored “the
importance of reforms to labor market institutions, particularly to
ensure that unemployment benefit systems provide good work incentives
and that regulation does not impede job creation.”

Germany is likely to remain one of the few sources of Eurozone job
gains in the months ahead. Here the jobless rate fell another 0.2 point
in October to 5.5%, down 1.3 points on the year. National data for
November showed a further drop of 20,000 — enough to trim the rate by
0.1 point.

Yet even Germany’s labor market will lose some steam next year as
economic growth slows, a study by the national Labor Agency suggests.
After a drop of 270,000 this year, unemployment would fall by an average
of 50,000 next year, assuming GDP growth of 1.0%. Most of that decline
would come from the statistical carryover of this year’s reduction.

In France, the unemployment rate was stable for the fourth month in
a row at 9.8%, despite a 34,000 surge in the number of registered
jobseekers seeking full-time work in October, after an upturn of 26,000
in September.

French industry began shedding short-term employees in the third
quarter as production contracted further. Retailers and wholesalers as
well as service providers canvassed earlier this month expected few new
hires in the near term, while builders anticipated further layoffs. The
November PMI polls flagged only a modest increase in employment.

In Spain, where the meltdown in employment has been the most
dramatic, the jobless rate rose 0.3 point to 22.8%, by far the highest
in the Eurozone. The rate for those under 25 jumped 0.6 point to 48.9%.

While near-term employment expectations of Spanish service and
retail firms recovered in November, anemic domestic demand, the chronic
slump in the housing market and the slowdown in demand across the
Eurozone do not augur any lasting improvement in the labor market. The
OECD expects the jobless rate to average nearly 23% next year and
decline only slightly in 2013.

Italy’s jobless rate rose 0.2 point to 8.5% after a 0.3-point
rebound in September. Hiring expectations recovered in November in all
main sectors except construction, according to the Commission’s surveys,
but they remained below average everywhere except for retailing.

Unemployment increased in most other reporting Eurozone countries
as well, boosting rates by 0.1-0.3 point. Rates ranged from a low of
4.1% in Austria to highs of 13.6% in Slovakia and 14.3% in Ireland.
Jobless rates were stable on the month in Finland, Slovenia and Ireland
and dipped 0.1 point in Luxembourg.

–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com

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