Europe's jobless numbers rise to decade high

The number of unemployed in the euro zone now exceeds 15 million following a sharp decline in productivity

• Ashley Seager
• guardian.co.uk, Tuesday 1 September 2009 14.24 BST
• Article history

The jobless rate in the 16-nation eurozone rose to 9.5% last month, its highest in a decade, as experts warned many more people would lose their jobs in the months ahead.

The number of unemployed rose 167,000 in July to just over 15 million people, the European Union's statistics office said today. That rise was, however, a lot smaller than the half million a month seen around the turn of the year.

Although the jobless rate across the bloc rose only slightly, there were significant differences in individual countries. Spanish joblessness, for example, rose to 18.5% from 18.1% in June and 12.5% a year ago. Ireland, another of the zone's worst-hit economies, saw the unemployment rate rise to 12.5% from 12.2%.

By contrast, the German unemployment rate remained stable at 7.7% for the three months to July and has moved up only 0.6 percentage points between September last year and July 2009.

The German government has been subsidising short-time working in a bid to prevent large-scale job losses. But the support will soon expire and economists are expecting unemployment in Europe's largest economy to increase sharply.

In France, joblessness is rising fairly rapidly and last month's rate rose to 9.8% of the workforce, up 0.2 percentage points.

"Eurozone unemployment still seems likely to rise markedly higher, thereby posing a serious threat to growth prospects over both the near and medium term," said Howard Archer, economist at IHS Global Insight.

"Unemployment is a lagging indicator and it will be some time before any improvement in economic activity feeds through to substantially help the jobs outlook," Archer said.

Across the whole European Union of 27 member states, unemployment rose to 9% from June's 8.9%, increasing by 225,000 to 21.794 million people.

Jennifer McKeown at Capital Economics was also gloomy about the period ahead. "Labour market developments tend to lag behind those in the wider economy and the recent sharp drop in productivity suggests that employment is far from having fully adjusted to the downturn.

"This all suggests that recent strong increases in consumer spending might not be sustained, particularly once government car purchase incentives expire at the end of this year," McKeown said.

Economists think the European Central Bank, which has cut interest rates for countries using the euro to a record low of 1%, is not expected to raise them any time soon, especially as consumer price inflation is also at record lows.