FRANKFURT: Unemployment rose for a fifth straight month in Europe in August and is expected to grow further amid concern that extensive government support programmes won't be able keep many businesses hit by coronavirus restrictions afloat forever.
The jobless rate increased to 8.1 per cent in the 19 countries that use the euro currency, from 8 per cent in July, official statistics showed on Thursday (Oct 1). The number of people out of work rose by 251,000 during the month to 13.2 million.
While Europe's unemployment rate is still modest compared with the spike seen in many other countries, economists predict it could hit double digits in coming months as wage support programmes expire. A resurgence in infections in many countries has meanwhile led to new restrictions on businesses and public life may that may have to be broadened and could lead to more layoffs.
European governments have approved trillions of euros to help businesses, setting up or bolstering programmes to keep workers on payrolls. In the region's largest economy, Germany, some 3.7 million people are still on furlough support programmes.
With no clear end to the pandemic in sight, the government has extended that through the end of 2021. The programme pays over 70 per cent of the salaries for workers put on short hours or no hours. The European Central Bank is injecting €1.35 trillion (US$1.57 trillion) into the economy.
But while such help has slowed the wave of unemployment, jobs continue to vanish. Companies in the hardest hit industries such as tourism, travel and restaurants expect a long period of weak business and are laying off workers.
In the centre of the Portuguese capital, Lisbon, laid off restaurant worker Mary Lopes, 21, was not put on a furlough scheme by her employer and is still waiting for unemployment papers. The restaurant she worked in close down completely in March. When it reopened, only a few of the staff were kept on, under tougher conditions, and the others were left out of work.
“Ive been working since I was 16,” said Lopes. “I was a good waitress – I know I was a very good waitress. So I dont understand this situation we are going through.”
Her older colleagues Anabela Santos, 48, and Carlos Silva, 69, say unemployment benefits barely cover expenses. Santos paid five months of overdue bills when she got her unemployment benefit, and sent resumes everywhere. “I havent managed to find another job,” she said.
“Its an overdose of stress because we havent a penny in our pockets,” says Silva. “We are left without any money after paying rent, water, energy and then we are suffering for those thirty days until the next 28th of the month or so.”
The pandemic is sending unemployment higher around the globe. Outside the 27-country European Union and its 19 members that use the euro, Britain faces a sharp increase in unemployment as the government plans to replace a broad furlough support programme at the end of October with a more limited version.
Some economists expect the unemployment rate to double to 8 per cent by year end. A lack of progress on reaching a new trade deal with the EU is only likely to worsen things.
In the US, the jobless rate fell sharply in August by 1.8 per cent to 8.4 per cent, after a sharper increase during the spring. The US, which has less in the way of labour market support programmes, saw unemployment spike as high as 14.7 per cent in May, followed by a steep fall as businesses and states reopened.
The number of Americans seeking unemployment benefits declined last week to a still-high 837,000, indicating companies are still cutting jobs despite the tentative recovery that began after states started reopening.
The recession has in some cases accelerated painful change that existed before the pandemic, such as technological shifts in the auto industry. Automakers Daimler and Renault, airline Lufthansa, oil company Royal Dutch Shell and travel concern TUI have announced sweeping cost-cutting and job reductions.