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TheStreet Open House

Eurozone Unemployment Rises To New Record

PAN PYLAS

LONDON (AP) â¿¿ Unemployment in the 17-country eurozone hit a record high of 11.6 percent in September, official figures showed Wednesday, a sign the economy is deteriorating as governments struggle to get a grip on their three-year debt crisis.

The rate reported by Eurostat, the EU's statistics office, was up from an upwardly revised 11.5 percent in August. In total, 18.49 million people were out of work in the eurozone in September, up 146,000 on the previous month, the biggest increase in three months.

While the eurozone's unemployment rate has been rising steadily for the past year as the economy struggled with a financial crisis and government spending cuts, the United States has seen its equivalent rate fall to 7.8 percent. The latest U.S. figures are due Friday.

With the eurozone economy fading, most economists think unemployment will keep increasing over the coming months and that the deteriorating economic picture will soon spook investors again after a brief hiatus.

"Financial markets have calmed somewhat, but we expect that the deteriorating economy will soon enough lead to more crisis headlines," said Tim Ohlenburg, senior economist at the Centre for Economics and Business Research.

Five countries in the eurozone are already in recession â¿¿ Greece, Spain, Italy, Portugal and Cyprus â¿¿ and others are expected to join them soon.

The region as a whole is expected to be confirmed to be in recession when the first estimate of eurozone economic activity in the third quarter is published mid-November â¿¿ a recession is officially confirmed after two consecutive quarters of negative growth.

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

Recession and unemployment make it more difficult for the eurozone to deal with its debt problem â¿¿ governments need to pay more benefits to the jobless and receive fewer tax revenues. That could push countries to take even more austerity measures, which in turn weighs on economic activity.

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