UPDATE 1-Euro zone employment logs record fall in Q1

Mon Jun 15, 2009 5:34am EDT

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* Falls steepest in Spain, Greece, Slovakia

* Consumer demand weak, points to easy ECB monetary policy

(Updates with economist's quotes)

By Marcin Grajewski

BRUSSELS, June 15 (Reuters) - The 16-country euro zone lost a record 1.22 million jobs in the first quarter of 2009, data showed on Monday, highlighting the depth of recession and boding ill for any quick turnaround.

The number of employed fell 0.8 percent in the first three months against the previous quarter to 146.2 million, pulled down by job losses in Greece and Spain, the European Union statistics office, Eurostat, said. [ID:nBRQ007378]

Employment during the first quarter fell 1.2 percent year-on-year, also the deepest annual drop since measurements started in 1995.

"Extended and deep economic contraction, depressed business confidence and deteriorating profitability increasingly fed through to reduce jobs across the euro zone in the first quarter," said Howard Archer, economist at consultancy IHS Global Insight.

Eurostat also revised down its quarterly employment figure for the last three months of 2008 to a drop of 0.4 percent from the previously reported 0.3 percent decline.

Recession-hit factories are closing and laying off workers, despite hundreds of billions of euros in government funds spent on stimulating the economy.

Weak job figures, coupled with the prospect of negative inflation, are likely to convince the European Central Bank (ECB) to keep its main interest rate at a record low 1 percent for an extended period, or even cut it, economists say.

"Markedly weakening labour markets are a major threat to recovery prospects in the euro zone," Archer said.

The euro zone's economic output shrank by a record 2.5 percent in the first quarter compared with the previous three months, although many economists believe falls in subsequent quarters will not be as deep.

The employment figures underscore weakness in consumer demand, key to lifting Europe from its worst recession since World War Two.

The steepest quarterly falls in employment were recorded in Spain, on 3.1 percent, Slovakia at 1.9 percent and Greece with 1.8 percent. In Germany, the euro zone's biggest economy, employment decreased by 0.3 percent.

Earlier in June, Eurostat said euro zone unemployment jumped to 9.2 percent in April, its highest level in nearly 10 years.

By comparison, the unemployment rate was 9.4 percent in May in the United States and 5 percent in April in Japan. (Editing by Dale Hudson)

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