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Monday, 31 October 2011

Average unemployment in Europe slightly higher. Unemployment rates in the Netherlands and Austria are positive exceptions. Spain and Greece face a grim future, with exploding unemployment.

On October 31, Eurostat, the statistical bureau of the European Union, presented the unemployment for the European Union for the month of September. Here are the most important parts of the press release from Eurostat:

The euro area (EA17) seasonally-adjusted unemployment rate was 10.2% in September 2011, compared with 10.1% in August. It was 10.1% in September 2010. The EU27 unemployment rate was 9.7% in September 2011, compared with 9.6% in August. It was 9.6% in September 2010.

Eurostat estimates that 23.264 million men and women in the EU27, of whom 16.198 million were in the euro area, were unemployed in September 2011. Compared with August 2011, the number of persons unemployed increased by 174 000 in the EU27 and by 188 000 in the euro area. Compared with September 2010, unemployment rose by 215 000 in the EU27 and by 329 000 in the euro area.

Compared with a year ago, the unemployment rate fell in fourteen Member States and increased in thirteen. The largest falls were observed in Estonia (17.9% to 12.8% between the second quarters of 2010 and 2011), Latvia (19.4% to 16.1% between the second quarters of 2010 and 2011) and Lithuania (18.2% to 15.5% between the second quarters of 2010 and 2011). The highest increases were registered in Greece (12.6% to 17.6% between July 2010 and July 2011), Spain (20.5% to 22.6%) and Cyprus (6.0% to 7.8%).

In September 2011, 5.308 million young persons (under-25s) were unemployed in the EU27, of whom 3.290 million were in the euro area. Compared with September 2010, youth unemployment increased by 41 000 in the EU27 and by 71 000 in the euro area. In September 2011, the youth unemployment rate was 21.4% in the EU27 and 21.2% in the euro area. In September 2010 it was 20.9% and 20.8% respectively. The lowest rates were observed in Austria (7.1%) and the Netherlands (8.0%), and the highest in Spain (48.0%) and Greece (43.5% in July). 

European unemployment rates (
Click to enlarge

The EU27 includes Belgium (BE), Bulgaria (BG), the Czech Republic (CZ), Denmark (DK), Germany (DE), Estonia (EE),Ireland (IE), Greece (EL), Spain (ES), France (FR), Italy (IT), Cyprus (CY), Latvia (LV), Lithuania (LT), Luxembourg (LU),Hungary (HU), Malta (MT), the Netherlands (NL), Austria (AT), Poland (PL), Portugal (PT), Romania (RO), Slovenia (SI),Slovakia (SK), Finland (FI), Sweden (SE) and the United Kingdom (UK).

In general you can say that the unemployment is not extremely high in the European Union. Only 9 of the 27 countries of the EU have an unemployment of more than 10%. These countries consist of the PIIGS (except for Italy) and the East-European countries Bulgaria, Slovakia, Estonia, Lithuania and Latvia. The unemployment of the last three, although still very high, has been dropping sharply YoY.

Much more worrisome is the situation of Greece (17.6%) and especially Spain (22.6%). Not only is the unemployment extremely high in these countries, but due to their financial problems , there is very little room for improvement in the coming months. Especially, as both countries are very dependent on tourism as a source of income. In the winter months, tourism drops to much lower levels than during the summer months and so will the employment in the tourism business.

And is the average youth unemployment already extremely high in the whole EU (21.4%), the youth unemployment in Spain (48.0%) and Greece (43.5%) is nothing less than a disaster. And, due to dropping tourism for the winter months and the lack of an economic spring for both countries, these rates will  rise rather than drop. Therefore these countries face a grim future in the coming years, unless something changes for the better very quickly.

To give you an impression of the current malaise in Spain, I want to show you the pertinent snips of two articles that appeared in Het Financieele Dagblad ( today:

In 2011Q3, the unemployment in the country rose to the highest level in 15 years. This was announced on Friday by INE, the Spanish bureau for Statistics in Madrid.

The unemployment rose to 21.5% of the labor force, compared to 20.9% in Q2. Almost 5 mln Spaniards are now unemployed. ‘These figures seem to predict a very negative scenario for the second half of this year’, according to analyst José Luis Martinez of Citibank in Madrid in a reaction. ’The bad situation on the labor market is a tell-tale signal in a Quarter in which tourism usually leads to extra jobs’.

The perspective for the labor market of Spain is not favorable for months to come. The economy is in a sturdy recession, caused by the considerable cutbacks that the Spanish government must carry through. The government in Madrid, just like the one in Rome, heard during last Wednesday’s European summit that additional cutbacks must be carried through, to prevent the financial markets from losing their confidence in Spain.

The Spanish economy didn’t grow in Q3 compared to Q2, while unemployment grew to 21.5%.

Year-on-year, the Spanish economy grew by 0.7%. This was announced by the Spanish central bank Banco de España. The government announced that the 2011 goal of 1.3% growth will probably not be realized. The disappointing figures are increasing the fears that Spain will sink into a recession.

The unemployment of 21.5% is the worst in fifteen years. Also the excess supply on the housing market remains a big problem in Spain. The country suffers from a surplus of 700,000 unsold houses.

Domestic demand got hit in Q3, according to the central bank, while exports and tourism showed positive developments.

Spain is one of the problem childs of the European debt crisis, with an expected debt of 67% of GDP at year-end and an interest of 5.6% on 10y sovereigns. As a consequence of the deficits, the social-democratic government implements an austerity program that leads to much protests among the population.

Spain is a beautiful and very sunny country, but these figures are far from sunny. And that is a real shame.

Only the most hardened perma-bull sees room for immediate positive change in Spain, but reality is that tourism will drop and unemployment will further rise in the coming months. Economic growth is anemic and the manufacturing and  services industry is anemic too. 

Especially the lacking outlook towards a more prosperous future for the young unemployed will cause that the young are probably sentenced to a life of relative poverty, unless they decide to temporarily move to Northern Europe (Scandinavian countries, The Netherlands, Austria and Germany). 

In these countries there is still a lot of manual and less qualified labor to be done in the greenhouses and in the manufacturing and services industry, for those who really want to work and don’t ask much for wages.

Unfortunately, the current, deteriorating economic situation leads to an upcoming of nationalism. It might even lead to acrimony towards foreigners in the Northern European countries, if the economic situation further deteriorates. Although this is not yet the case, it is a predictable consequence of an extremely bad economic situation. And that the economic situation will become extremely bad is something that I am not in doubt of.

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