Youth Unemployment Shows Euro-Area Recovery Not Working for All

(Bloomberg) -- For all the continued momentum in the euro-area recovery, differing prospects for young people across the bloc show the wounds of the debt crisis remain very raw.

The unemployment rate for those under age 25 was at 19.4 percent in February, according to data on Monday. While that's an improvement compared with a year ago -- and is the lowest since 2009 -- it's more than twice the total for the euro-area of 9.5 percent. In four southern European countries -- Greece, Spain, Italy and Cyprus -- at least three in 10 young people are still out of work.

European Central Bank President Mario Draghi last month highlighted the improving jobs figures as proof that the central bank's quantitative easing isn't just boosting asset prices and widening inequality, but benefiting ordinary citizens. Still, the latest jobless numbers indicate the level of slack still in the labor market, even as the headline rate has come down from its peak of more than 12 percent four years ago.

“We're still very far away from the wage growth we saw pre-crisis,” said Bert Colijn, senior euro-area economist at ING Bank NV in Amsterdam. “With labor market conditions as slack as they are, and with youth unemployment still quite high, it seems that Draghi will probably need to remain cautious until we really see some strengthening labor market signs.”

Euro-area inflation slowed for the first time in nearly a year in the euro area last month and economic confidence unexpectedly dipped, muffling some of the calls on Draghi to begin moving toward unwinding stimulus. Still, factory growth accelerated to the highest since 2011, adding to evidence that the recovery is firming.

As of this week, the ECB is scaling down monthly QE purchases, though its chief economist, Peter Praet, said the new pace isn't the start of the end. The bank wants a “more lasting transmission of stimulus,” he said in an interview with Spanish newspaper Expansion published Monday.

For Draghi, the pick up in the economy owes much to the central bank's actions. Any let up in its extraordinary easing before there's more evidence that the recovery is sufficiently broad-based to maintain inflation near its 2 percent goal risks putting it all in jeopardy.

“Those who had doubts about the equity of our asset purchase program are being answered because the most equitable measure of all is to create employment and to decrease unemployment,” Draghi said last month, touting the creation of more than 4 million jobs in the last three years.

While quarterly employment has risen consistently in that period, the unevenness across geography and age groups show how complicated it is for the ECB to set monetary policy for 19 nations.

In Germany, the youth unemployment rate is just 6.6 percent. That's lower than the overall rate in Spain has ever been since the euro's introduction. In Greece, still struggling seven years after its first bailout, the figure in December was almost seven times greater than Germany's, at 45.2 percent.

Draghi has said that monetary policy can't take the whole weight of the economic recovery, and repeatedly urged governments to implement reforms to reduce structural unemployment. That's made harder by the rise of populist parties across Europe, with France and Germany all facing general elections in the coming months.

Still, the falling trend in youth unemployment has meant the subject gets less attention from policy makers than at the height of the European debt crisis, when the rates in Greece and Spain soared above 50 percent and protest movements occupied streets.

“Politically it seems that at the moment, in the core countries, it's not the young people but the old people that who are the problem to stability,” said Christian Schulz, European economist at Citigroup. “Brexit and some of the right-wing populists gain more share among the older voters than among younger voters. The focus has shifted a little bit.”

To contact the reporter on this story: Marcus Bensasson in Athens at mbensasson@bloomberg.net.

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss