BRUSSELS — Unemployment in the 16-nation euro zone hit a record 10 per cent in February, official figures showed yesterday, as inflation spiked, showing Europe's fragile recovery is largely a jobless one.
February's figures showed an increase of 61,000 people on unemployment lists throughout the euro zone, tipping the rate into double figures, from 9.9 per cent in January, for the first time since the currency came into being in 1999.
For the 27-nation European Union as a whole, the jobless rate in February stood at 9.6 per cent, slightly up from 9.5 per cent in February, the EU's official Eurostat statistics agency reported.
Meanwhile, Eurostat announced an unexpectedly swift rise in the euro zone annual inflation rate, up to 1.5 per cent in March, a 15-month high and well above the 0.9 per cent recorded in February.
Analysts polled by Dow Jones Newswires had expected inflation to hit a more modest 1.2 per cent in March.
"It is likely that energy and food related base effects have played a key role in pushing up inflation," said CIB BNP-Paribas economist Clemente De Lucia.
However, inflationary pressures should remain weak, he added "as excess of spare capacity combined with weak domestic demand will exert downward pressures on inflation."
Moreover, the rising jobless toll, with one in 10 workers unemployed in the euro zone, "should limit wage growth, one of the main drivers of inflation," he added.
Howard Archer, chief European economist at London-based IHS Global Insight agreed, saying rising unemployment, albeit at a reduced rate was likely to continue in the months to come given the "gradual economic recovery".
This, he said "is likely to hold down wage growth and limit the upside for consumer spending."
Analysts expect euro zone consumer price inflation to hover around 1-1.5 per cent in the near term, thus remaining below the European Central Bank's target rate of "close to but just below 2 per cent" through 2010.
Therefore the unexpected rise in inflation in March is unlikely to persuade the European Central Bank to alter key interest rates from the current 1 per cent until next year, Archer said. "Furthermore, the ECB will probably continue to tread lightly in withdrawing its emergency liquidity measures," he added.
The Euro zone inflation rate of 1.5 per cent is the highest since December 2008. It has risen, almost continuously, since standing at 0.5 per cent last November, as the bloc emerges from the worst recession since the 1930s.
Before that there were months of negative inflation.
The figures highlight European leaders' fears that, despite massive state intervention, the recovery remains largely jobless, with companies restructuring — often offloading workers — in order to remain viable.
The euro zone jobless figures have risen from 8.5 per cent to 10 per cent over the past year. — AFP
