World Economy Slides Deeper Into Slump

By Andre Damon
2 October 2012

A string of negative reports coinciding with the start of the fourth quarter has revealed a significant deterioration in the global economy, with world trade slowing, manufacturing contracting, and the number of unemployed workers in the euro zone hitting a record high.

Despite these disastrous figures, stock prices in Europe and the United States rose on Monday, fueled by new central bank injections of cash into the global financial system, an intensification of austerity measures against the working class and expectations of new bank bailouts.

Eurostat, the European Union statistics agency, reported Monday that the unemployment rate in the 17-member euro zone remained at record highs in August, while the ranks of the unemployed grew by 34,000, bringing the total of jobless workers to a new high of 18.2 million. The jobless rate was 11.4 percent, the same as in July. A year ago, the region’s jobless rate was 10.2 percent.

In the 27-nation European Union as a whole, 25.5 million people were out of a job in August. The EU unemployment rate was 10.5 percent.

The unemployment rates of Spain, Greece and Portugal, the countries hardest hit by the euro crisis, all rose. Spain’s unemployment rate reached 25.1 percent, that of Greece hit 24.4 percent, and Portugal’s rose to 15.9 percent.

The unemployment rate for Italy stayed at 10.7 percent and France’s remained at 10.6 percent. Last week, the French government said the number of unemployed had hit a new record of 3 million.

Youth unemployment in the euro zone likewise worsened, hitting 22.8 percent in August, up more than 2 percentage points from a year ago, according to the Eurostat report. In Spain, 52.9 percent of people under 25 were without work.

The jobs crisis in Europe is likely to get even worse. Markit Economics reported Monday that its euro zone purchasing managers’ index (PMI), a key measure of manufacturing output, was 46.1 in August. As a reading below 50 indicates contraction, the August report marked the fourteenth consecutive month of decline in the manufacturing sector.

PMI figures released last week for both Germany and France, the core countries of the euro zone, showed sustained contraction. France’s PMI showed one of the biggest one-month falls in the survey’s 14-year history.

Chris Williamson, chief economist at Markit, said that “manufacturers across the euro area suffered the worst quarter for three years in the three months to September. Output, order books and exports all continued to fall at steep rates … causing firms to cut their staffing levels once again.”

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