Euro zone unemployment rate hits 9.6%

The unemployment rate in the euro zone hit 9.6% in August - the highest in over a decade after the number of jobless rose by 165,000 during the month, bringing the total jobless number using the single currency bloc to 15.17 million.

The 10-year high comes despite the fact that many euro zone economies emerged from recession in the second quarter after experiencing positive growth.

However the figures, which were released by Eurostat, were in line with analysts’ expectations.

Spain saw the highest increase in unemployment in the euro zone, rising from 11.8% to 18.9% on an annual basis.

A recent report said unemployment in Spain could reach 25% in the next three years due to the severe slump within the construction industry.

Meanwhile, Ireland’s unemployment rate has nearly doubled to 12.5% on annual basis, while Germany, Europe’s largest economy, has seen unemployment rise marginally over the year from 7.2% to 7.7%.

Yesterday, Eurostat announced that consumer prices fell in the euro zone in September by a faster rate than they had in the previous month.

Furthermore, prices fell further than had been expected by economists after Eurostat said the inflation rate fell to -0.3% in the 12 months to September, from -0.2% in the year to August.

On a monthly basis, prices in the 16 nations that use the euro slid 0.2% percent in August, 0.7% in July and 0.1% in June.

September represents the fourth consecutive month that the rate of inflation has been negative in the euro zone but the European Central Bank (ECB) does not expect deflation.

A short period of deflation (where prices fall rather than increase) could be a serious threat to the economy because it deters consumers and businesses from spending in expectation of falling prices.

Inflation is expected to stay negative next month due to falling oil prices. However, according to Martin van Vliet, an economist at ING, headline inflation is likely to turn positive in November and creep up going into 2010.

Discuss this in the Finance Markets forums

Story link: Euro zone unemployment rate hits 9.6%