Euro zone unemployment hits 10-year high of 9.6 percent

Unemployment in the 16-country eurozone rose to a more than 10-year high of 9.6 percent in August and economists warned it will likely worsen further, hurting the prospects for a strong economic recovery. The European Union statistics office said on Thursday the number of people without work had risen by 165,000 from July to 15.17 million as firms closed factories and laid off workers in the worst economic crisis since World War Two.
Economic analysts said unemployment had not peaked yet even though some companies may now be more prepared to retain workers because the economic outlook was improving. "Nevertheless, eurozone unemployment still seems likely to rise significantly higher, thereby posing a serious threat to growth prospects over both the near and medium term," said Howard Archer of IHS Global Insight.
The unemployment level in the eurozone compared with July's 9.5 percent and was in line with analysts' expectations. In the whole 27-country European Union, unemployment rose to 9.1 percent in August from 9.0 percent the month before. Eurostat said 3.2 million people had lost their jobs in the eurozone since August 2008, when unemployment was 7.6 percent.
Spain, whose construction sector has been hit by the global credit crunch, suffered the steepest increase in that time - from 11.8 percent to 18.9 percent. Ireland's rate almost doubled to 12.5 percent over the year while in Germany, the eurozone's biggest economy, it rose from 7.2 percent to 7.7 percent.
The eurozone economy is forecast to start expanding in the third and fourth quarters of 2009, but growing unemployment means private consumption is likely to be weak, and analysts expect any recovery to be fragile. EU leaders have also underlined the risk of social unrest, and a potential political risk, if unemployment keeps growing. Governments have poured billions of euros into the economy, hoping to prevent job losses and long-term unemployment, and eurozone finance ministers were discussing when to remove the stimuli at talks on the Swedish city of Gothenburg on Thursday.