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By Bob Blandeburgo
European payrolls suffered their worst decline on record in the first quarter, and pending job cuts in that region's auto and airline sectors means those losses could worsen going into 2010.
For the 16 countries that use the euro, a record 1.2 million workers – 0.8% of the worker ranks – lost their jobs in the year's first three months, the worst showing since Eurostat, the European Union's statistics office, began tracking job data. In the entire European Union, comprised of 27 countries, employers slashed their payrolls by 1.9 million workers.
Spain was hit the hardest of the euro countries, reporting a 3.1% drop from the previous quarter and a year-over-year decline of 6.4%. In the entire European Union, Lithuania's job losses were 4.5% from the prior quarter, and a 5.1% decline from the comparable quarter last year.
"Companies will continue to cut jobs well into 2010, pushing up unemployment across the region," Deutsche Bank AG (NYSE: DB) economist Stefan Bielmeier told Bloomberg News. "While the economy may start to stabilize, the worst is still ahead in terms of the labor market."
Bielmeier's prediction shares similarities with a Money Morning report last week that U.S. job seekers may find it tough to land new employment as the American economy works its way back from its worst recession since World War II. The potential for a so-called "jobless recovery" may not be just a U.S. concern going forward: The bloodletting in the worldwide job market is expected to end sometime next year, but headcount growth among companies will be slow as they try to do more with less.
Unemployment in the euro region is currently at 9.2% versus the United States' 9.4%, but is expected to top out much higher at 11.5% next year. A consensus among economists has stateside unemployment peaking at roughly 10%.
Considerable job cuts loom in Europe's automotive and airline industries.
Hanover, Germany-based Continental AG (ADR OTC: CTTAY), the second-largest auto parts supplier in Europe, said it might cut as much as 2,600 jobs due to decreased demand. Air France-KLM (ADR OTC: AFLYY) Chief Executive Officer Pierre-Henri Gourgeon said his company could lay off up to 5,000 workers in the coming year after worldwide airline losses reach $9 billion, double the previous forecast.
While virtually no Western nation can offer an upbeat economic forecast, the U.S. outlook is decidedly more positive than that of its counterpart in Europe.
Meanwhile, increasing European job losses pose a threat to any near-term recovery. "Markedly weakening labor markets are a major threat to recovery prospects in the euro zone," IHS Global Insight Economist Howard Archer told Reuters.
Europe's gross domestic product shrank by a record 2.5% in the first quarter, but several economists believe that subsequent declines will not be as deep.
News and Related Story Links:
- Bloomberg News:
Europe Payrolls Shrink by Record 1.22 Million Jobs
- Money Morning:
Is the U.S Economy Headed for a "Jobless Recovery?"
- Money Morning:
Unemployment Rate Hits 25-Year High, But Losses Narrow
Euro Zone Employment Logs Record Fall in Q1
Euro Area and EU27 Employment Down by 0.8%