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Record unemployment stalks Eurozone

Debt-laden Europe logged record unemployment on Tuesday and its core currency and shares plummeted amid a worrying industrial slowdown.

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The unemployment rate hit 10.1 percent in April, its highest since the euro came into being in 1999 in just one of a series of blows on Tuesday to the eurozone economy after a brief lull last week in market pressure.

Almost 16 million people were out of work across the 16 countries that share the euro, the European Union said.

The numbers reached more than 23 million in the 27-nation EU as a whole, including non-euro giants Britain and Poland, 2.4 million more than one year earlier.

The euro sank to a new four-year low of US$1.2115 on concerns about the European financial sector’s ability to weather the region’s debt and deficit crisis.

“We have no doubts on the future of the euro. The euro is one of the most stable currencies in the world,” European Commission chief Jose Manuel Barroso told reporters during an EU-Russia summit.

European stocks fall

However, European stock markets also fell sharply, as market reports said the European Central Bank had warned that eurozone banks could face new asset write-downs.

Meanwhile, fresh data from purchasing managers further showed that private sector manufacturing output growth slowed in May to a level not seen since the collapse of Lehman Brothers in late 2008.

Leading economy Germany recorded a “significant slowdown” in its growth rate, with the overall trend reflecting “the speed with which uncertainty surrounding the sovereign debt crisis appears to have hit business activity,” according to Markit research (sic) boss Chris Williamson.

Analysts noted that the number of new jobless in the eurozone, at 25,000 in May, was the smallest monthly rise since last November, and well down from the previous month.

However, “the rise in the number of eurozone jobless spiked up to 287,000 in the first quarter of 2010 from 137,000 in the fourth quarter of 2009,” London-based IHS Global Insight economist Howard Archer underlined.

“Despite April’s much reduced rise in unemployment, we remain doubtful that the eurozone labour market is on the brink of turning around,” he stressed.

The latest figures show US unemployment running at 9.9 percent, and Japan’s at just 5.0 percent.

Varying unenmployment across Eurozone

Throughout the EU, only Germany recorded a fall in unemployment over the full year, from 7.6 percent to 7.1 percent.

Deficit-plagued Spain, with a 19.7 percent rate beaten only by Latvia, saw unemployment among under-25s reach a dizzying 40.3 percent in the first quarter of 2010.

The threat of nasty tailwinds from the world’s deepest post-war recession lurks behind a sharp slowdown in growth.

“All countries saw a deterioration in growth of output and new orders,” said London-based Markit of the manufacturing brakes, particularly painful in recessionary Greece.

“The extent to which manufacturing growth slowed in May has been exceeded only once in the survey’s 13-year history, in the aftermath of Lehman’s collapse,” they said referring to the September 2008 bankruptcy of Wall Street giant Lehman Brothers.

There was some good news in the data, relating to the currency fall.

Export growth was “running at a near 10-year peak,” said Williamson, and his figures actually indicated a rise in manufacturing employment for the first time in two years.

“The sharp depreciation of the euro will also sustain activity, particularly in Germany and in Italy which export more outside the zone than inside,” stressed BNP Paribas analyst Clemente De Lucia.

However, Paris-based De Lucia also warned that serious belt-tightening in most European countries – fearful of a battering the way Greece was brought to its knees – as well as tumbling stock values and weakening consumer confidence data over recent months “are likely to drag down private consumption.”

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New Hendra outbreak in Queensland

Biosecurity Queensland is managing another case of Hendra virus infection, after test results on a deceased horse came back positive for the virus.

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Deputy Chief Veterinary Officer, Rick Symons, said a private vet last week reported a suspected case on a property outside Bowen in north Queensland to Biosecurity Queensland after attending a sick horse on the property.

“The vet attended the horse over several days last week and samples were taken and forwarded to Brisbane for testing,” Dr Symons said in a statement.

The horse was euthanased on Thursday.

Control procedures were put into place when the sample results came back positive on Tuesday night, Dr Symons said.

“There is one other horse on the property, which is healthy,” he said. “A third horse on the same property died one month ago but we do not have any samples to test.

“The property is under quarantine.”

The resident of the property has been informed of the test results.

Vets ‘wearing protective clothing’

Dr Symons said there were a number of horses on an adjoining property and Biosecurity Queensland officers were working with the owner to assess if they had been exposed to the horse that died most recently.

“Staff will also speak to a small number of residents in the immediate area today and provide the latest information about Hendra virus,” he said.

It is the 13th known incident of Hendra virus infection since 1994.

Rockhampton vet Alister Rodgers died this month after catching the virus from an infected horse he treated near Rockhampton on July 28.

Dr Symons said it was understood the vets who attended the Bowen horse had been wearing appropriate protective clothing.

“Following the recent tragic events surrounding the Hendra outbreak at Cawarral near Rockhampton, there is a greater awareness amongst vets and horse owners of the risks associated with Hendra virus,” he said.

“We encourage vets, horse owners and the community to be vigilant and report any suspected cases of Hendra virus to Biosecurity Queensland and, most importantly, to take appropriate precautions when handling any sick horse.”

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US rebounds from recession

The United States rebounded from recession in the third quarter, posting its strongest economic growth in two years as government stimulus spurred consumer spending.

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After four negative quarters, the world’s largest economy grew at a seasonally adjusted 3.5 per cent annual rate in the July-September period from the second quarter, the Commerce Department said.

The increase was the first since the second quarter of 2008 and the strongest expansion since the 2007 third quarter, when a US subprime mortgage crisis triggered a global financial crisis that hammered the world economy.

The expansion followed an unrevised 0.7 per cent decline in the second quarter.

The department’s first estimate of third-quarter gross domestic product (GDP), a broad measure of the country’s output of goods and services, was slightly higher than the 3.2 per cent reading expected by most analysts.

President Barack Obama welcomed the data as “an affirmation that this recession is abating and the steps we’ve taken have made a difference.”

Unemployment a major hurdle

But, he warned: “We have a long way to go to fully restore our economy, and recover from what has been the longest and deepest downturn since the Great Depression.”

“The benchmark I use to measure the strength of our economy is not just whether our GDP is growing, but whether we are creating jobs, whether families are having an easier time paying their bills, whether our businesses are hiring and doing well.”

While a recession is widely regarded as ended by one quarter of economic growth, in the United States the economy will not be officially out of recession until it has been declared by the National Bureau of Economic Research.

Unemployment remains a key hurdle to sustained recovery. The jobless rate rose to a new 26-year high of 9.8 percent in September and is expected to hit double digits. Since the official start of recession in December 2007, the number of unemployed has climbed by 7.6 million to 15.1 million.

The Labor Department reported Thursday that new weekly claims for unemployment benefits fell slightly.

“The recession is over, but don’t be fooled by today’s number — the underlying rate of recovery is weaker,” said Nariman Behravesh, chief economist at IHS Global Insight.

Economy ‘on life support’

Behravesh said that underlying growth was closer to 2.0 per cent and predicted momentum would only pick up in the second half of next year as consumers and businesses grow more confident.

After shrinking a sharp 6.4 per cent in the first quarter, the world’s largest economy has been on life support from the federal 787-billion-dollar emergency stimulus and other support measures.

The third-quarter rebound was led by consumer spending, which accounts for two-thirds of US economic activity and added 2.36 percentage points to GDP growth.

Consumer spending surged 3.4 per cent after a 0.9 percent drop in the second quarter, a rise the department said “largely reflected” auto purchases under the government’s popular “cash-for-clunkers” program in July and August.

Dean Baker, co-director of the Center for Economic and Policy Research, noted that, excluding the auto sector, consumption grew at a 1.0 per cent annual rate.

Core inflation rate falling

“With disposable income falling due to continued job losses and declining hourly wages, and the reversal of the surge in car sales, consumption growth will almost certainly be negative in the fourth quarter,” Baker said.

Other leading drivers of third-quarter growth were business inventories and home building.

The core inflation rate — which strips out volatile food and energy prices — fell to 1.4 per cent from 2.0 per cent, indicating inflationary pressures remain tame amid economic weakness.

The Federal Reserve, which keeps a close eye on the reading, is widely expected to leave its key interest rate unchanged at nearly zero when policymakers meet on November 3-4.

“If we do indeed get a second consecutive quarter of good growth, there will be a lot of pressure on the Fed to start raising rates,” said Joel Naroff of Naroff Economic Advisors.

“Indeed, I wouldn’t be surprised if the markets start pricing that into bond yields during the rest of the year.”

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London 2012 faces ‘tight’ finances

The London Olympics face a “tight” financial situation, with only 194 million pounds available to cover any new risks in the run-up to 2012, a parliamentary committee warned on Wednesday.

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The Committee of Public Accounts also raised concerns about how organisers LOCOG intend to raise 400 million pounds from ticket sales while balancing its commitment on affordability.

“The position is tight, with no room for complacency and limited flexibility to respond to new problems as the Games approach,” said committee Chairman Edward Leigh.

Construction of the Olympic Park in east London is on time and within the 9.3 billion pound budget, the committee noted. It praised the Olympic Delivery Authority (ODA) for controlling costs and finding savings across its programme, especially after the collapse of private funding for the Olympic Village and media centre during last year’s credit crunch.

But of the original 2.74 billion pounds of contingency, only 1.2 billion remain, and all but 194 million of that is currently earmarked for known risks.

Unforeseen costs continue to arise, including a recent 276 million pound bill to secure the Park after construction.

Staying within budget also depends on receiving about 600 million pounds of receipts from the Olympic Village.

LOCOG aims to raise the 2 billion pounds it needs to stage the Games through sponsorship, merchandising and ticket sales, and has attracted 70 percent of that total so far.

Tickets do not go on sale until next year, but the committee called on LOCOG to publish now the principles on which ticket availability and prices would be determined.

It said it was “reasonable to assume” tickets for a family of four could cost about 100 pounds, with prices varying according to each event.

The committee also urged LOCOG to establish a contingency fund to protect against failure to raise the funds.

The government aims to repay 675 million pounds of the 2.1 billion pounds the National Lottery has put up for the Games through future profits on the sale of Park land and assets, but the committee noted there was no guarantee on the value and timing of that payment.

Responsibility for security in certain areas has yet to be resolved, such as the “grey space” between the transport hubs and Park venues, the committee said. It called on the government to make clear who has overall executive authority.

(Editing by Steve Addison)