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Tuesday, January 31, 2012 12:27 PM


Euro Area Unemployment Rate Up 0.2 Percentage Points to 10.4%; 8th Consecutive Monthly Rise; Further Deterioration Coming; Country-by-Country Comparison; Expect Germany to Turn for the Worse


Courtesy of a Barclays Capital email here are the latest unemployment numbers in Europe.

Euro Area: +0.2 to 10.4% based on slight upward revisions in November, September, August. This was the 8th consecutive rise.

  • Austria 4.1% unchanged
  • Belgium: 7.2% unchanged
  • Finland 7.6% unchanged
  • France 9.9% +0.1
  • Germany: 5.5% -.1
  • Italy 8.9% +0.1
  • Ireland 14.5% +0.1
  • Netherlands 4.9% unchanged
  • Portugal 13.6% +0.4
  • Slovakia: 13.4% -.1 to
  • Spain 22.9% unchanged


Quarterly Perspective
From a quarterly perspective, the unemployment rate in Germany fell 0.2pp to 5.6% in Q4 (from Q3 - and -1.1pp from a year ago). Following the same trend, in Ireland, it has edged down from 14.5% to 14.4%.

France's rose by another 0.1pp in Q4 11 to 9.8% after Q3 11 and is just 0.1pp above the 9.7% Q4 10 level; Italy's rose 3 tenths in Q4 11 to 8.7%, now 0.5pp above Q4 10.

In the last quarter of the year, the situation in Portugal worsened particularly quickly as the unemployment rate rose 0.6pp to 13.3%, 1pp above Q4 10. In Spain, the situation deteriorated even quicker as the unemployment rate rose 7 tenths to 22.8% in Q4 11, 2.4pp above Q4 10 print.
Hiring Intentions



Barclays comments "We find that the overall picture is fairly negative and that it will not get any better in the short run. We expect the unemployment rate in the euro area to continue increasing - possibly at a faster pace - and we think it is more likely to stabilise in 2013 than in 2012."

Germany Unlikely to Keep the Boat Afloat

Barclays says Germany Unlikely to Keep the Boat Afloat
Germany is the only country among the main countries whose sentiment on future employment is levelling off at such high levels. This bodes well for the future performance of its economy, on top of its strong fiscal position.

Bringing France, Italy and Spain into the picture, we believe that the gap between Germany and the rest of the euro area should increase. France's labour market is faltering badly, while those of Italy and Spain, while stabilising at low levels, have leeway to fall further due to the likely additional fiscal consolidation. Nevertheless, although it has a c.30% weighting of euro area GDP, Germany won't be able to generate a strong enough positive loop to offset the negative trends at play within its euro area partners, we believe.

As a result, we expect the euro area unemployment rate to continue trending higher. Aside of a likely rise to 10.4% in the December print (to be released tomorrow), which would take the Q4 reading to 10.3%, up 0.2pp from Q3, we believe that the unemployment rate could reach 11.3% in Q4 12, only stabilising at the beginning of 2013.

Our hiring intentions index in the euro area has continued to deteriorate in January, albeit at the most modest pace since May 2011 (the beginning of the drop). It is now in negative territory for the second month in a row, at -0.2, the lowest level since August 2010. At the sector level, divergences were limited. The retail sector dropped the most by -0.1 pts, while the overall services index (normalised, 3mma) remained unchanged.
Expect Germany to Turn for the Worse

Like Barclays, I expect the European picture to deteriorate.

Unlike Barclays, I expect a dramatic reversal in Germany. The German export machine cannot keep humming mightily along with a slowdown in China and the huge recession that is going to hit Europe.

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