Unemployment in eurozone reaches highest on record

Unemployment in the eurozone reached the highest on record as a deepening economic slump and budget cuts prompted companies from Spain to Italy to reduce their workforces.

The jobless rate in the 17-nation eurozone was at 11% in April and March, the EU’s statistics office in Luxembourg said yesterday.

That is the highest since the data series started in 1995. The March figure was revised higher to 11% from 10.9% estimated earlier.

Europe’s companies are under pressure to lower costs to protect earnings as the worsening fiscal crisis erodes exports and consumer spending. Euro-area economic confidence dropped more than economists forecast last month and manufacturing output contracted.

Deutsche Lufthansa AG said on May 30 it may cut as many as 1,000 jobs at LSG Sky Chefs, the world’s largest inflight caterer, in a bid to lower costs through 2014.

“The labour-market recession in the eurozone continues to spread and deepen,” Martin van Vliet, an economist at ING Bank in Amsterdam said.

“We currently see the jobless rate peaking at or slightly above 11.5%, under the assumption that the eurozone economy starts to emerge from its double-dip recession later this year.”

The euro was lower against the dollar for a fourth day, trading at $1.2327 at 10:35am in London, down 0.3% on the day.

In the eurozone, 17.4m people were unemployed in April, up 110,000 from the previous month, the report showed. In the year-earlier month, the jobless rate fell in 11 EU countries and increased in 15 with Ireland reporting an unchanged rate.

Adding to signs of a deepening slump, European economic confidence dropped more than economists forecast in May and manufacturing output contracted for a 10th straight month. In Germany, business sentiment fell more than economists had forecast in May, posting the steepest decline since August.

The European Commission said on May 11 the eurozone economy may shrink 0.3% this year. The ECB, which will publish its latest projections forecasts a contraction of 0.1% in the euro-area.

The euro has dropped 7.3% against the dollar over the past two months to near a two-year low as investors grew more concerned about a fracture of the currency area.

Spain is trying to buttress its financial system even as borrowing costs approach levels that forced Greece, Ireland and Portugal to ask for external aid.

— Bloomberg