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UPDATE 1-Euro zone April joblessness hits near 10-year high

Published 06/02/2009, 05:50 AM
Updated 06/02/2009, 05:56 AM

(Adds economists' comments)

By Jan Strupczewski

BRUSSELS, June 2 (Reuters) - Euro zone unemployment jumped in April to its highest level in nearly 10 years, data showed on Tuesday, boding ill for any quick recovery from the worst economic recession since World War Two.

The unemployment rate in the 16-nation euro zone rose to 9.2 percent from March's 8.9 percent as 396,000 people lost their jobs, bringing the number of people out of work to 14.579 million, the European Union statistics office said.

The figure, above the 9.1 percent expected by economists in a Reuters poll, was the highest since September 1999, signalling the real economy has yet to see the glimmers of optimism appearing in sentiment surveys.

"Although there are mounting signs that the rate of economic contraction across the euro zone is moderating appreciably ... this is unlikely to prevent unemployment from rising substantially further," said Howard Archer, economist at IHS Global Insight.

The European Commission expects unemployment in the euro zone to rise to 9.9 percent this year from 7.5 percent in 2008 and to 11.5 percent in 2010.

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

The Commission expects the euro zone economy to return to growth in year-on-year terms from the middle of 2010.

"Sharply higher, rising unemployment will weigh down on euro zone consumer spending, especially as it will be liable to lead to slowing wage growth," Archer said.

"This threatens to outweigh the boost to purchasing power coming over the coming months from sharply retreating inflation."

Consumer prices stopped growing in the euro zone in May, a first estimate showed last week. Economists forecast they will fall in June and July in annual terms because oil prices are less than half of their mid-2008 level.

In the entire 27-country European Union, unemployment rose to 8.6 percent from March's 8.4 percent, hitting its highest level since the start of 2006.

Spain had the highest unemployment rate in the EU at 18.1 percent, up from 17.3 percent in March, closely followed by Latvia on 17.4 percent, up from 16.1 percent.

In Germany, the euro zone's biggest economy, unemployment rose to 7.7 percent from 7.6 percent and in France, the second-biggest, to 8.9 percent from 8.8 percent. (Additional reporting by Marcin Grajewski; Editing by Dale Hudson)

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