Euro-Area Unemployment Rises to Record, Inflation Slows: Economy

The euro-area jobless rate climbed
to a record in September as the fiscal crisis and tougher
austerity measures threatened to deepen the economy's slump.

Unemployment in the 17-nation region rose to 11.6 percent
from 11.5 percent in August, the European Union's statistics
office in Luxembourg said today. That's the highest since the
data series started in 1995. The data also showed that youth
unemployment is at 23.3 percent, with Spain's rate more than
double that, at 54.2 percent. A separate report showed inflation
cooled to 2.5 percent in October from 2.6 percent.

The debt crisis has pushed at least five euro nations into
recessions and eroded investor and business confidence, forcing
companies to cut costs to help weather the turmoil. Economic
confidence in the region fell in October, according to a report
yesterday, while data today French consumer spending rose less
than economists forecast in September.

"We've become more pessimistic," said Christoph Weil, an
economist at Commerzbank AG in Frankfurt. "The euro-area
economy will probably only return to growth in the second
quarter of 2013. The situation on the labor market will continue
to worsen, with the jobless rate increasing to 12 percent."

The euro traded at $1.2995 as of 11:33 a.m. in Brussels, up
0.3 percent on the day. The Stoxx Europe 600 Index added 0.3
percent. The gauge is on course for five straight months of
gains, the longest winning streak in six years.

Spain, Ireland

Today's jobless report showed that 18.5 million people were
unemployed in the euro area in September, up 146,000 from the
previous month. At 25.8 percent, Spain had the highest jobless
rate in the currency bloc. Portugal's unemployment rate was at
15.7 percent, while Ireland reported a jobless rate of 15.1
percent. France's jobless rate was at 10.8 percent, while
Austria had the lowest rate at 4.4 percent.

Job cuts at some of the largest companies in Europe may
deepen the economic slump by eroding consumer spending across
the euro area. Air France-KLM (AF) Group said today it will seek
1,300 job cuts at its Dutch unit in addition to 5,000 already
being eliminated at the larger French business. Deutsche
Lufthansa AG, Europe's second-largest airline, is cutting 3,500
administrative posts and as many as 1,000 in catering.

'Negative View'

Fiat SpA (F), the Italian carmaker that controls Chrysler Group
LLC, forecast a prolonged downturn in the European market
yesterday after reporting a wider loss there. The Turin, Italy-
based company also cut revenue and profit goals for 2014.

"Events of the past 12 months have reinforced our negative
view of the development of the European markets," Fiat Chief
Executive Officer Sergio Marchionne said. "We see continuing
weak trading conditions for the remainder of 2012, extending
well into 2013 and at least part of 2014."

The euro-area economy probably continued to shrink after
contracting 0.2 percent in the second quarter, putting it into
its first recession since 2009. Economic confidence dropped to
the lowest in more than three years in October and manufacturing
and service industries contracted. German business confidence
also declined this month.

Adding to signs the economic slump is spreading to core
nations, French consumer spending rose 0.1 percent in September
from the previous month, national statistics office Insee said
today. That's below the 0.2 percent median estimate of
economists in a Bloomberg survey.

'Very Pessimistic'

Joseph Stiglitz, a Nobel-Prize winning economist and
professor at Columbia University, said in an interview on
Bloomberg Television on Oct. 30 that he's "very pessimistic"
about the prospects of a European recovery.

"Basically Europe has put in place austerity packages that
almost inevitably will lead the economy to become weaker, they
haven't put in place anything that will promote economic
growth," he said. "It's difficult to see what the impetus for
real growth in Europe will be."

Elsewhere, indicators showed that the worst of the declines
in Asia-Pacific economies may be moderating. Taiwan's gross
domestic product rose 1.02 percent in the third quarter from a
year ago, after a 0.18 percent drop in the previous three-month
period. South Korea's industrial output rose 0.8 percent last
month, while Singapore's unemployment rate in the third quarter
dropped to the lowest in 1 1/2 years.

In the U.S., the Institute for Supply Management-Chicago
Inc.'s business barometer probably rose to 51 in October from
49.7 in the previous month, according to a Bloomberg survey. A
reading above 50 indicates expansion.

The European Central Bank, which has cut borrowing costs to
a record low, in September predicted a deeper slump this year
than previously estimated, with ECB President Mario Draghi
saying earlier this month that risks to the outlook are "on the
downside." The central bank on Sept. 6 also lowered its
inflation estimates for this year and next.

Euro-area core inflation, which excludes volatile costs
such as energy, held at 1.5 percent in September. The statistics
office will release the figure for October next month. The ECB
will hold its next rate assessment on Nov. 8.

To contact the reporter on this story:
Simone Meier in Zurich at
smeier@bloomberg.net

To contact the editor responsible for this story:
Craig Stirling at cstirling1@bloomberg.net

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