Euro-area unemployment stayed at 11.9 percent in February, highlighting the region’s uneven recovery as Germany’s labor market kept strengthening and Italy’s jobless rate reached a record.
The jobless rate was revised lower in January and in the prior two months from 12 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast 12 percent for February, according to the median of 32 estimates in a Bloomberg News survey.
In Italy, the unemployment rate reached a record 13 percent, while the number of Germans out of work fell in March, according to separate reports. That divergence underscores the challenge faced by the European Central Bank’s Governing Council this week as it meets to assess the risk of deflation in the region at a time when consumer prices are increasing at about a quarter of the pace that officials are aiming for.
“The unemployment rate will remain broadly stable this year as the rise in employment is too modest to trigger a significant decline,” Apolline Menut, a London-based analyst at Barclays, said by telephone before today’s data. “More worrying is the contagion from short-dated to more medium-term inflation expectations as further downward moves could push an already late ECB into loosening monetary policy further.”
European stocks advanced today, with the Stoxx Europe 600 Index gaining 0.4 percent to 335.52 at 11:13 a.m. in Brussels. The euro appreciated against the dollar, rising 0.2 percent to $1.3791.
International investors are returning to the euro, including to nations that received bailouts in the depths of the crisis. U.S. exchange-traded funds show net inflows of $634 million into Spain this year, marking an increase of 71 percent, according to data compiled by Bloomberg. Flows into Greece have increased 77 percent to $102 million.
Separate data today showed euro-area manufacturing activity stayed close to the highest since 2011, confirming a March 24 estimate. Last week, economic confidence increased more than analysts forecast in March as an index of executive and consumer sentiment rose to the highest since July 2011.
French carmaker Renault SA plans to hire at its Valladolid plant in Spain to increase output and executives from Germany’s Bayerische Motoren Werke AG last week said that they see potential in Europe for new models amid a gradual economic recovery.
Still, Europe’s fragile labor market remains a concern for its leaders with February unemployment rates varying from a low of 4.8 percent in Austria to 25.6 percent in Spain. Greece, which last reported in December, had a jobless rate of 27.5 percent. Among people under the age of 25, unemployment in the 18-nation currency bloc stands at 23.5 percent.
“Weak inflation in March and continued difficulties on the labor markets are already well anticipated by the ECB,” said Anatoli Annenkov, senior economist at Societe Generale SA in London. “What’s needed in Europe is to see a trend break in unemployment and faster job creation, but more structural reforms will be needed for that.”
ECB President Mario Draghi last week said that the central bank’s accommodative monetary policy should increasingly have an impact on the economy as disruptions in the financial system wane. Even so, the Frankfurt-based central bank is determined to act if “downside risks” appear, he said.
The European Central Bank estimates that the euro-area economy will expand 1.2 percent this year after it shrank 0.5 percent in 2013. Unemployment will average 12 percent this year and 11.8 percent in 2015, economists forecast in a separate Bloomberg survey.