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TheStreet Open House

Euro in Danger as Unemployment Hits Record

NEW YORK ( TheStreet) -- The latest labor market data from the 17-member eurozone shows that unemployment levels rose to a record 12.2% in April. This puts the region on a pace to reach 20 million jobless citizens before the end of the year.

As a comparison, the latest population figures for Australia came in at 22 million, so it's quickly becoming clear that the region's debt crisis (forcing governments to cut spending and hike taxes) is far from over.

These numbers also suggest the European Central Bank's policy measures have had only a limited effect on the prospects for economic recovery. The zone's jobs crisis continues to escalate, and with recessionary conditions dominant many countries are facing minimal near-term growth. This increases the possibility of renewed selling pressure in the region's benchmark stock indices (such as the DAX, IBEX and CAC 40), and in the euro currency itself.

To play these expectations, investors can consider sell positions in the CurrencyShares Euro Trust (FXE) or buy positions in the PowerShares DB US Dollar Index Bullish (UUP), which is likely to gain as a safe haven alternative to the euro.


Before the worst of the global financial crisis hit in 2008, eurozone unemployment hovered near 7.5%. The latest numbers from April showed an increase to 12.2%, but there are drastic differences between countries. In Spain and Greece, the jobless rate is above 25%. In more stable countries, like Austria and Germany, joblessness holds near 5%.

Perhaps more alarming, however, is the jobless rate for those aged 16 to 25. For both Spain and Greece, this number is well above 50%. For the eurozone as a whole, it is 24.4%. Longer term, permanently entrenched unemployment becomes a real risk, which lowers the potential for sustainable growth in coming years.

These data are just the latest evidence of deterioration in the broader economic trends. Greece is now in its sixth year of a devastating recession. GDP numbers in Germany show that growth is contracting in even the region's stronger economies. The eurozone as a whole is experiencing its longest recessionary period since the union was established in 1999. By contrast, the U.S. has shown steady growth since 2009, with labor market data dropping sharply below the peak jobless rate of 10%.

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