Reuters/Brussels


Overall, another 185,000 people across the eurozone were out of work in January compared to December
Eurozone joblessness rose to a new euro-era high while inflation was largely steady at the start of 2012, data showed yesterday, leaving the European Central Bank to juggle the demands of a slowing economy and only mild pressure on prices.
A cold snap in Europe and rising oil prices were probably behind the slight rise in February consumer prices that took inflation for the eurozone to 2.7%, compared to 2.6% in January, figures from the EU’s statistics office Eurostat showed.
The eurozone’s economic slump has helped bring the prices of goods, fuel and food down from last year’s peak of 3%, but oil prices hit record highs in euro terms this month and undermined inflation’s downward trend.
That suggests the ECB is likely to put off any quick decision to take interest rates to below 1% for the first time and economists see the bank in “wait-and-see” mode.
The bank wants to keep inflation below, but close to 2% over the medium term. Stripping out volatile energy and food prices, inflation in January was 1.9% on an annual basis, Eurostat said yesterday.
Falling prices may help European households, but the eurozone is heading into its second recession in three years and unemployment is one of the biggest challenges for EU leaders.
The number of people out of work in the eurozone rose to 10.7% in January, up from an upwardly revised 10.6% in December. That was far higher than the 8% rate when euro coins and notes began circulating in 2000, and the latest figure masks the north-south split in the eurozone’s fortunes.
Unemployment in Spain rose to 23.3% in January, the highest level in the 17-nation currency area, but was just 4% in Austria.
Overall, another 185,000 people across the eurozone were out of work in January compared to December, Eurostat said.
The rise in unemployment was higher than the 10.4% forecast by economists in a Reuters poll. But that was perhaps not surprising, given that business managers in an EU survey released this week said they were generally pessimistic about their ability to hire new staff even as wider business confidence improves.
A Reuters poll taken last month suggested the eurozone as a whole will probably wallow in a relatively mild recession until the second half of this year and the survey data showed the manufacturing sector will not be its saviour.
Factories cut jobs at the fastest rate in nearly two years and new orders continued to decline, while the output sub-index dipped to 50.3 from a flash and January reading of 50.4.
“New orders continued to fall, meaning companies generally remain reluctant to expand capacity and take on new workers, often preferring instead to cut costs and prepare for tough times ahead,” Williamson said.
Declining orders meant factories ate into backlogs of old work for the ninth month in a row.
The European Commission expects the eurozone’s economic output to shrink 0.3% in 2012, the second recession in just three years for the common currency area.
Earlier data from Germany, which has proven more resilient to the eurozone crisis than some of its peers and is Europe’s largest economy, showed the manufacturing sector barely grew last month as new orders fell for the eighth month.
The ECB cut its main refinancing rate to a record low of 1% in December and is seen cutting it further to 0.75% next quarter in a further attempt to stimulate growth.