Economists were more optimistic than businesses and consumers in the eurozone, as figures show economic confidence reached its lowest level in three years. German unemployment was up for a fifth straight month, and in France, where almost one out of every four young people is unemployed, President Francois Hollande pushed a state-subsidized program to hire the young.
Bloomberg reported Thursday that while economists had predicted a median decrease in economic confidence to 87.5, the actual numbers released by the European Commission (EC) in Brussels came in at 86.1 for August, down from 87.9 in July. As the eurozone economy shrank 0.2% in Q2, moving ever closer to recession, both consumers and executives in the region had little cause for optimism.
“The euro-region economy will continue to show negative growth rates, with a moderate contraction in the second half,” according to Uwe Duerkop, an economist at Landesbank Berlin. Duerkop was quoted saying, “The question is, what will happen next in terms of the crisis? I wouldn’t necessarily only expect negative news over the next months; a lot of adjustment measures have already been decided, and that’s why there’s a basis for this crisis to peter out.”
Negative news is still forthcoming, however. Germany’s unemployment rate rose more than expected. The Federal Labor Agency in Nuremberg said Thursday that those without a job numbered 2.9 million; that’s up a seasonally adjusted 9,000. Economists had predicted a median increase of only 7,000.
For August, the jobless rate was up an unadjusted 29,000. Federal Labor Agency President Frank-Juergen Weise said in the report, “It’s normal for unemployment to rise in a holiday month, but the increase this month is bigger than usual.”
Carsten Brzeski, senior economist at ING Group in Brussels, was quoted saying, “The strong labor market has been one of the main drivers of German growth in the first half of the year. Today’s numbers provide further evidence that the labor market is gradually losing steam and that the positive impact on the economy should peter out toward the end of the year.”
In France, where the youth unemployment rate is nearly 23% and Reuters reported that figures released Monday show a fifteenth straight month of rising joblessness to hit a 12-year high, Hollande’s government has fast-tracked a plan to spur jobs for those 16 to 25 years old. Under the arrangement, which will create 100,000 jobs in the public sector and 50,000 in the private sector by 2014, companies will only have to pay as little as 25% of the salary for youths that they hire for at least a year; the balance will be paid by the government for up to three years. Preference will be given to those from poor urban or rural areas, and to jobs in certain sectors, such as green or digital technology or medicine.