Thursday, 14 March 2013 18:39

Eurozone unemployment rose to a new record high level in January

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- However, with inflation dropping, the likelihood of ECB monetary assistance to support the economy may be rising.

The unemployment rate across the eurozone in January rose to a fresh record high of 11.9% in

January. However, headline figures continue to mask huge country level variations, and the

goods news, especially in the context of declining inflation, is that the likelihood of further

monetary assistance from the ECB may be rising. 

 

The seasonally adjusted unemployment rate across the eurozone in January rose to an all-time high

of 11.9%, up from 11.8% in the previous month. One year earlier, in January 2011, the unemployment rate was 10.8%. For the purpose of comparison, the unemployment rate in the US was only 7.7% in February, while in the UK, similarly, it was 7.8% in the three months to December.

However, since the onset of the sovereign debt crisis, a notable feature of the eurozone’s overall

economic performance has been some remarkably wide country level divergences. This has nowhere

been more apparent than in the unemployment figures - among member states, the lowest rates of

unemployment were recorded in Austria (4.9%) and Germany (5.3%), while the highest rates were

seen in Greece (27.0%), Spain (26.2%) and Portugal (17.6%).

 

From a policy perspective, such big variations in economic performance can be very challenging, but

with the eurozone as a whole expected to remain in recession (the ECB recently cut its 2013 real GDP forecast to a range of -0.1% to -0.9%), the likelihood of further monetary assistance on the part of the ECB may be increasing. Hitherto, the ECB has decided against cutting its main policy interest rate owing to inflation staying above its official 2.0% target level, but with inflation recently dipping below this level (1.8% year-on year in February), the likelihood that it will cut rates in order to support the economic growth are probably increasing.

 

* latest available data for Greece is for November.

This information comes from Fidelity Worldwide Investments, specialists in ISA (https://www.fidelity.co.uk/investor/isa/default.page), SIPPs (https://www.fidelity.co.uk/investor/pensions/fidelity-sipp/default.page) and fund management.

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Amy Fry

Amy Fry is a former financial adviser specialising in the area of personal finance, and discusses a range of topics including budget planning, debt solutions and savings schemes. Amy spends her spare time taking city breaks across Europe and riding her bike along the seafront in Brighton, where she currently lives with her son.