Unemployment rises and experts warn of worse to come

Unemployment in the eurozone rose to a new record high of 11.6 per cent in September, it was revealed today, meaning there were 18.49 million people out of work in the single currency region – and economists warned that the figure could rise much further over the coming months.

The jobless rate in the 17-nation bloc was up from 11.5 per cent in August, the European Union's statistics agency Eurostat said, with an additional 146,000 people unemployed in September compared with the previous month. For the wider EU of 27 member states, unemployment was unchanged in September at 10.6 per cent.

Spain and Greece continued to suffer the highest jobless rates of 25.8 per cent and 25.1 per cent respectively, though the latest figures for Greece date back to July. At the opposite end of the spectrum, unemployment was just 4.4 per cent in Austria, 5.2 per cent in Luxembourg and 5.4 per cent in both Germany and the Netherlands.

The figures were "both disappointing and worrying", according to Howard Archer, chief European and United Kingdom economist at IHS Global Insight. "Eurozone labour markets remain under serious pressure from ongoing weakened economic activity and low business confidence."

"It is notable that several of the core eurozone countries saw unemployment rise further in September," he said, adding there was a "real danger" the rate could soar above 12 per cent during 2013. "Companies generally are under serious pressure to keep their labour forces as tight as possible to contain their costs in the face of current limited demand, strong competition, squeezed margins and worrying and uncertain growth outlooks."

Ben May, European Economist at Capital Economics in London, said: "With survey measures suggesting that firms are becoming more reluctant to hire, the eurozone unemployment rate looks set to rise further, placing more pressure on struggling households."

Similarly, Andrea Broughton, principal research fellow at the Institute for Employment Studies, said: "Given the ongoing financial difficulties of the EU and the likelihood of continuing job losses in the public sector as austerity measures begin to bite, overall unemployment levels and youth unemployment in particular are likely to carry on rising for the foreseeable future."

Youth unemployment in the eurozone was 23.3 per cent in September, up from 21 per cent a year previously. In Spain and Greece the proportion of young people out of work was 54.2 per cent and 55.6 per cent respectively, according to the latest figures, compared with 8 per cent in Germany and 9.7 per cent in the Netherlands.

Meanwhile Eurostat also said it expected inflation in the eurozone to have fallen to 2.5 per cent in October compared with 2.6 per cent in September. Archer said: "The edging down in eurozone consumer price inflation in October was primarily due to the year-on-year increase in energy prices dipping to a still substantial 7.8 per cent from 9.1 per cent in September. This countered higher prices for food, alcohol and tobacco."

Tim Ohlenburg, senior economist at the Centre for Economics and Business Research, said: "Financial markets have calmed somewhat, but we expect that the deteriorating economy will soon enough lead to more crisis headlines and a resurgence in bond yields. While the European Central Bank will assure liquidity, longer-term solvency is far from guaranteed. A full bail-out for Spain and perhaps another for Italy are looming."