Eurozone Wrapup: Unemployment Rate 10.7%, Highest Since 1999; Manufacturing PMI Contracts 7th Month; German Retail Sales Unexpectedly Fall

There was lots of Eurozone news this week outside of the typical Greek default fodder. Nearly all of that news was not pretty. Let's take a look at the key stories.

Eurozone Unemployment Rate 10.7%, Highest Since 1999

The Telegraph reports Eurozone unemployment hits record high of 10.7pc

Data from Eurostat showed that the region lost 185,000 jobs in one month, with the vast gap between North and South growing ever wider. The figures for the previous four months were also revised upwards sharply. There are now more than 450,000 more people without jobs than assumed a month ago.

Klaus Baader from Societe Generale said the outlook was "deteriorating drastically" in the region. "Economic slowdown and fiscal austerity has hit the labour market much harder than previously thought."

Eurozone inflation nudged up to 2.7pc, while the latest PMI data for February confirmed that Euroland's manufacturing is still contracting, though the index rose slighty to 49. The "misery mix" of rising unemployment and inflation is a nasty headache for policymakers, threatening incipient stagflation.

Spain's jobless rate continued its relentless climb to 23.2pc, rising to 49.9pc for youths.

The jobless toll rose to 14.8pc in both Ireland and Portugal, though the latter began its austerity drive later. Dimitris Drakopoulos from Nomura said Portugal's economy is likely to contract by 4.4pc this year and another 2.7pc next year, a slightly milder version of the fiscal asphyxiation that brought Greece to its knees.

Eurostat's 19.9pc rate for Greece is already out of date. The Hellenic Statistical Authority said the country lost 126,000 jobs in November alone, pushing the rate to 20.9pc.

At the other extreme, Austria's jobless rate fell to 4pc. Germany's unemployment is at a 20-year low of 5.8pc, and some regions are crying out for skilled workers.

Italian Unemployment Hits Record

Please consider Italian unemployment hits record

The unemployment rate in the eurozone continued to rise in January, hitting another record high. There are now 16.9 million people out of work in the bloc, Eurostat said.

In Italy, the unemployment rate rose to 9.2% in January, the highest since monthly records began, the national statistics agency Istat said.

Italian unemployment had stood at 8.9% in December, but it is now at the highest rate since the first quarter of 2001, as the country finds itself in a second recession in four years.

�Double whammy�

Meanwhile, separate data from Eurostat showed that inflation in the euro area rose to 2.7% in February, rising slightly from 2.6% in January. It marks the 15th month in a row that inflation has been above the ECB�s target of just below 2%.

Howard Archer, chief European economist at IHS Global Insight, said it amounted to a �double whammy of bad news� for the eurozone. �This is particularly bad news for consumers, as they are not only facing high and rising unemployment, but also still squeezed purchasing power,� he said.

French Unemployment Rate Hits 9.4 Percent

Please note French unemployment up to 9.4 per cent in Q4 of 2011

France's unemployment rate rose by 0.1 per cent in the fourth quarter of 2011 to 9.4 per cent of the active population, state statistics agency INSEE said on Thursday.

The 0.1 per cent rise applied to both the increase from the third quarter of 2011 and the year-on-year increase from the fourth quarter of 2010.

France's growing joblessness is a major issue as President Nicolas Sarkozy bids for re-election in an April-May two-round presidential election.

Eurozone Unemployment Rates at a Glance

• Eurozone Average 10.7%
• Spain 23.2%
• Greece 20.9%
• Ireland 14.8%
• Portugal 14.8% 
• Latvia 14.7%
• Lithuania 14.3%
• Estonia 11.7%
• Cyprus 9.6%
• Italy 9.2%
• France 9.4%
• Germany 5.8%
• Luxembourg  5.1%
• Netherlands 5.0%
• Austria 4.0%

Take a look at those varying unemployment rates. That is what a "one size fits Germany" interest rate policy and misguided currency union will do.

About that 5.8% German Unemployment Rate

Is Germany's unemployment rate really 5.8%? I think not. Wolf Richter comments on the German Unemployment Obfuscation.

Richter counts up all the groups that don't count and comes up with 1,701,534. That number is a bit off the mark given the officially unemployed number is 3,081,706 but 5,394,064 people actually received unemployment compensation.

There's still more obfuscation as shown in the following snip.

People 58 and older are excluded from the official unemployment numbers, even if they're desperately looking for a job. They don�t receive unemployment compensation but, conveniently, pre-retirement compensation. So they don't count for the simple reason that they're too old to count. That�s the German baby-boom generation. They're turning 58 in massive numbers and fall unceremoniously off the unemployment lists. In September 2011, the last month for which official numbers were available: 374,592.

Add them to the 5,394,064 official recipients of unemployment compensation to obtain 5,768,656.

And what about those who aren�t eligible for unemployment compensation? While they receive �social aid� and other forms of support, they don�t count as unemployed.

So, like in the US, the actual number of unemployed people and the actual unemployment rate remain a mystery, despite the confidence-inducing but false sense of accuracy that these grotesquely unrounded numbers provide. And in the end, unemployment in Germany is probably close to double the official headline number.

So what's the real German unemployment rate?

German Retail Sales Unexpectedly Fall

Bloomberg reports German Retail Sales Unexpectedly Fall

German retail sales unexpectedly declined in January as rising oil prices fueled inflation.

Sales, adjusted for inflation and seasonal swings, fell 1.6 percent from December, when they increased 0.1 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a gain of 0.5 percent, the median of 22 estimates in a Bloomberg News survey showed

Europe�s debt crisis is curbing growth across the euro area, Germany�s largest export market, and higher energy costs pushed inflation to 2.5 percent last month. Still, unemployment is running at a two-decade low and recent data suggest the country may avoid a recession. Consumer confidence will increase to a 12-month high in March, [consumer research group] GfK SE (GFK) predicted this week.

German companies may create as many as 250,000 new jobs this year, the DIHK national industry and trade chambers said on Feb. 17, citing a survey.

Avoid a Recession?

What the hell is Bloomberg writer Jeff Black smoking? The recession is right here, right now. As for jobs creation, forget about it. The European-wide recession is going to be long and deep, so who pray tell is Germany going to be exporting to?

By the way, why was this drop unexpected? I have been calling for it for some time, and it's going to get worse, much worse.

Eurozone Manufacturing PMI� Contracts 7th Consecutive Month

Inquiring minds are reading the Markit Eurozone Manufacturing PMI� Report.

The Eurozone manufacturing sector showed further signs of stabilisation in February. The seasonally adjusted Markit Eurozone Manufacturing PMI� rose to a six-month high of 49.0, unchanged from the earlier flash estimate and above January�s 48.8.



New Orders Fell 9th Month 

New orders fell for the ninth month running (though slightly less than indicated by the flash release), with the downturn in demand generally remaining broad-based by nation as only Austria and the Netherlands reported increases. Greece saw record falls in both output and new orders.


Export Orders Fall 8th Month

The level of new export orders fell for the eighth month running, albeit at the weakest pace since last July. The drop in foreign demand was led by a steep reduction in Greece and marked falls in Spain and Germany, the region�s largest exporter.


Muted pricing power resulting from weak demand and strong competition meant that the rise in costs was largely absorbed by manufacturers.

German job creation slowed sharply



Job losses were reported for the third time in the past four months in February. The steepest falls in employment were seen in Greece and Spain, though further marginal cuts in staffing levels were also signalled in Italy, the Netherlands, Austria and Ireland.

Stabilization? Really? No, Not Really!

Given the drop in  new orders, export orders, and German employment, coupled with rising input prices and a huge profit squeeze, it takes a real stretch of the imagination to even hint at stabilization. Moreover, austerity measures in Spain, Portugal, Greece, France, and Ireland suggest things are going to get much worse.

There is no way the vaunted German export machine stays intact in the face of those facts.

Within two months, and probably next month, the bottom will fall out of numerous eurozone production and retail sales numbers. Moreover, the lid will blow off the top of numerous eurozone unemployment numbers.

In both cases, the biggest "unexpected" downward surprises will be in Germany, even though it should be perfectly obvious what is going to happen.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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