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Italy’s unemployment hits all-time high

Italy’s unemployment rate reached 11.1% in October, the highest level since January 2004, which experts said showed the Italian economy remains fragile despite some encouraging signs.

Italy’s National Statistic Institute reported Friday that the official unemployment was above the 10.9% predicted in the local media earlier in the week and significantly worse than the 10.8% recorded in September.

According to Mauro Dal Cerro, an economist and former analyst with the Italian Treasury, the still-rising unemployment rate is a reflection of a lack of confidence from Italian companies.

“There are some reasons for optimism because bond yields are lower, some much-needed reforms are in place, and the economy should be a little stronger in Y 2013 than it is this year,” Dal Cerro said.

“But the fact that companies aren’t hiring, I think that means they are not convinced any kind of a turnaround is in the works,” he added.

The news is particularly bad for young workers. A stunning 36.5% of the workers 15 to 24 anni are unemployed, also an all-time high. The rate increased by nearly 6% over last year.

Dal Cerro said the figure was a reflection that with a stagnated labor market, too few new entry-level jobs were opening up. “The outlook is particularly bleak for the youngest workers,” Dal Cerro said.

Italy’s unemployment figures actually under-report the percentage of the work force without a job, since it does not include figures for people who have given up looking for work or otherwise off unemployment insurance roles.

Most economists expect unemployment figures to continue to rise into next year, before the figure starts to drop by early summer, according to a research note published by Banca Intesa Sanpaolo.

Italy, now in its 4th recession since Y 2001, has seen growth hampered by spending cuts and increased taxes from the technocrat government led by Prime Minister Mario Monti, a former European Commissioner.

While Monti’s austerity reforms have lessened the likelihood that Italy could be forced to default on its sovereign debt. That has reduced borrowing costs for the government.

The yields for the benchmark 10-yr bond were as low as 4.5% Friday, their lowest levels since June 2010, but it has made the day-to-day life for many Italians more difficult.

The same ISTAT report with the new unemployment figures also showed that consumer confidence also reached its lowest level since Y 1996, and slumping household demand for purchases threatened to result in falling prices in some areas going forward.

The Paris-based Organization for Economic Cooperation and Development said earlier this week that Italy’s economy would shrink by 2.2% this year, more or less in line with ISTAT forecasts of a 2.4% contraction.

A further 0.2 to 0.5% contraction in the economy in Y 2013 is predicted from most models.

According to Hildebrandt & Ferrar technical analyst Anna Maria Zenato, the unemployment figures show that even while the perception is that the worst may be over for the Italian economy, employers are not convinced.

“When you see companies hiring new workers, that’s going to be a very solid signal that better days are ahead,” she said.

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