AFP, Reuters/Brussels/New York

 

Eurozone unemployment continued at record highs in June and while a first fall in the jobless numbers for more than two years offers some hope, officials and analysts were cautious on the outlook.

“The figures remain horrendously high,” a European Commission official said, stressing the need to press ahead with economic reforms needed to boost employment.

“Let’s be frank. There is no silver lining here ... the figures are pretty much the same as the previous month.”

The 17-nation eurozone jobless rate came in at 12.1%, unchanged from May, the Eurostat data agency said yesterday.

The jobless numbers, however, were down 24,000 to 19.26mn.

In the 27-member European Union, 10.9% of the workforce was out of a job, down from a revised 11% in May, it said, as the total unemployed fell 32,000 to 26.42mn.

Analysts had been looking to the report to back up recent data which suggested the stuttering eurozone economy was on the point of escaping a deep and damaging recession which has cost millions of jobs.

The damage done by the debt crisis and slump is clear in the figures — in June 2012, the eurozone jobless rate was 11.4%, with the EU on 10.5%.

The crisis has affected the 16-25 age segment worst of all, with jobless rates running at catastrophic levels of 58.7% in Greece and 56.1% in Spain.

The data showed the eurozone youth unemployment rate rose to 23.9% in June from 23.8% in May, with the EU up to 23.2% after 23.1%.

Compared with June 2012, Eurostat noted that youth jobless numbers in the EU had fallen by 43,000 to 5.51mn but in the eurozone, it had increased by the same amount to 3.52mn.

Inflation meanwhile was flat in July at 1.6%, suggesting that there was little increase in demand to drive prices anywhere near the European Central Bank target of just below 2.0% in the medium term.

Analysts found little comfort in the figures. Jonathan Loynes of Capital Economics said the two reports were “a little sobering after the recent run of stronger activity data.”

If the June fall in eurozone jobless numbers was the first since April 2011 and the headline 12.1% rate was below forecasts for 12.2%, this “reflected a downward revision to previous months’ data,” Loynes said.

The unemployment rate “is still at a record high,” he added, while huge differences — Austria on 4.6% and Spain 26.3% — “are a powerful reminder of the still enormous economic imbalances” at work in the bloc.

“Overall, with unemployment high and inflation pressures weak, there is still a strong case for further policy stimulus in order to sustain the tentative signs of recovery,” Loynes concluded.

Howard Archer of IHS Global Insight was slightly more positive.

The fall in the jobless numbers “is likely a reflection of recent increased signs ... activity has stabilised and it fuels hopes that the eurozone can eke out marginal growth over the second half,” Archer said in a note.

At the same time, “we doubt that June marks a decisive turnaround ... and we suspect that unemployment will trend modestly higher over the coming month,” he said.

The eurozone economy may have stopped “contracting in the second quarter after a record six quarters of decline (but) economic activity is likely to remain too weak through 2013, and very possibly during the early months of 2014, to prevent unemployment from rising further.”

Data on Tuesday had shown that European business and consumer confidence edged up again in July, extending gains since May while earlier the closely-watched Markit Purchasing Managers Index returned to positive territory for the first time for 18 months, signalling growth.

Meanwhile, a report by a payrolls processor showed yesterday that US companies added 200,000 jobs in July, topping economists’ expectations, in an encouraging sign for the labour market recovery.

Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 180,000 jobs. June’s private payrolls were revised up to an increase of 198,000 from the previously reported 188,000.

The ADP figures come ahead of the government’s more comprehensive national labour market report on Friday, which includes both public and private-sector employment.

Economists often refer to the ADP report to fine-tune their expectations for the payrolls numbers, though it is not always accurate in predicting the outcome. The report is jointly developed with Moody’s Analytics.

Analysts were also trying to gauge what the figures might mean for the Federal Reserve’s potential timeline for winding down its stimulus programme. The US central bank has laid out plans to start slowing its $85bn in monthly bond purchases later this year if the economy progresses as expected.

“ADP clearly confirms the US job engine is operating on all cylinders, slanting the odds toward, or at least putting the pressure on the Fed to taper sooner rather than later,” said Boris Schlossberg, managing director at BK Asset Management in New York.

Tomorrow’s payrolls report is expected to show a net 184,000 jobs were added in July, including 189,000 private jobs.

 

Job cuts loom as Eads changes identity

Eads will take the name of its flagship brand Airbus and target higher profits by combining defence and space units, Europe’s top aerospace group confirmed yesterday, in a move that could involve job cuts.

Nine months after giving in to political opposition to his attempt to merge with UK arms firm BAE Systems, chief executive Tom Enders declared civil jets the main “growth engine” for Eads investors, who pushed shares to new highs.

Enders did not rule out job cuts in the group’s 45,000-strong defence and space operations, which will be based in Germany.

“It means some real restructuring, but we are forced to do it: the defence business is ... shrinking in Europe,” he said.

The company also warned the move could lead to restructuring charges later in the year — a standard sign ahead of layoffs. But it also deferred the politically sensitive decisions until after German elections in September by promising to carry out a more detailed review of the proposals in the second half.

The changes will come into affect starting from January 1, allowing time for what could be lengthy talks with unions.

“To keep the company economically successful, the restructuring must take place in a socially acceptable way,” Ruediger Luetjen, head of the company’s European works council and a representative of trade union IG Metall, told Reuters.

The company is already on a potential collision course with the German government over the allocation of jobs for Airbus A350 jets, in a dispute that shows few signs of easing.

People familiar with the matter say Airbus is unwilling to give guarantees over the share of work on the latest jet as long as Germany holds back a development loan. Berlin, for its part, wants guarantees about work on future projects.

“The German government will work closely (with Eads) during the upcoming restructuring process and will place great importance on Germany’s interests as an industrial location,” Economy Minister Philipp Roesler said 

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