Europe's unemployment hits ten-year record[fr][de] 

The jobless rate in the 16-country euro currency area climbed to its highest since May 1999 as the number of people without work rose by 167,000 from June to 15.09 million, the European Union's statistics office said on Tuesday. 

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

"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," the economist said. 

Socialists call for a high-growth policy

Poul Nyrup Rasmussen, former Danish prime minister and head of the European Socialist party, said that he saw unemployment rising this year and next year to reach 28 million. Speaking at an event organised by the Brussels-based think-tank Bruegel, Rasmussen stressed that there could be a major split in society between well-educated people, who could easily find new jobs in growing sectors, and the socially-vulnerable, such as blue collar workers, young people and those living outside major cities. 

The president of European Socialists called for a "high-growth policy" to stimulate the economy, funded by eurobonds raised jointly by European governments. 

Ireland and Spain badly hit

The rise in joblessness was highest in crisis-stricken Ireland, Spain, where the global credit crunch has pummelled the construction sector, and in France. In Belgium, unemployment eased. 

In the whole 27-nation EU, unemployment rose to 9% of the workforce from June's 8.9%, increasing by 225,000 to 21.794 million people. Governments have been pouring billions of euros into the economy, hoping to prevent job destruction and long-term unemployment in the wake of the worst post-war economic downturn. 

Unemployment affects consumer confidence

The high and rising number of unemployed affects consumer confidence and household purchasing power, which in turn prevents a more robust economic recovery despite rising optimism among businesses and increased orders. 

"Even though some euro zone countries returned to growth in the second quarter and others are likely to follow in the third quarter, we suspect that economic activity will remain too weak to actually generate net jobs until at least the second half of 2010," Archer said. 

With consumer prices falling again in August and consumer inflation expectations at record lows, the unemployment data is likely to add to arguments for the European Central Bank to keep interest rates at record lows of 1% even if the economy emerges from recession in the third quarter as many expect. 

"Rising unemployment is likely to limit eurozone consumer spending, especially as it is also contributing to slowing wage growth. This is countering the boost to purchasing power currently coming from modest deflation," Archer said. 

(EurActiv with Reuters.)