Italian Jobless Holds at 2-Year High Amid Recession

By Lorenzo Totaro

Dec. 18 (Bloomberg) -- Italy’s unemployment rate held at a two-year high in the third quarter and the number of jobless rose as the country’s worst recession since 1992 sapped demand and forced companies to fire workers.

The jobless rate held at 6.7 percent, matching the revised pace for the previous three months, the Rome-based national statistics office said today. The number of unemployed rose to 1.53 million from 1.4 million a year earlier. The median forecast of 11 economists surveyed by Bloomberg News was for a jobless rate of 7 percent.

Italy, the euro region’s third-biggest economy, entered its fourth recession in seven years in the third quarter as the global economic slowdown aggravated the effects of waning productivity and competitiveness, prompting the country’s biggest manufacturers to cut output and jobs. The economy is set to contract this year and next, the most prolonged slump since the end of World War II, Italy’s employers’ lobby Confindustria said on Dec. 16.

“Employment trends follow those of gross domestic product and unfortunately there will be more nasty figures for 2008 and most of 2009,” said Gregorio De Felice, chief economist of Intesa Sanpaolo SpA in Milan. “Only after that we may see some improvements in the labor market and possibly a fall of the unemployment rate.”

Fiat Layoffs

The unemployment rate rose to 6.1 percent from the third quarter of 2007, Istat said. Not since 1999 has the non- seasonally adjusted number risen for three consecutive quarters. The number of people looking for jobs has increased by 127,000 to 1.53 million.

Fiat SpA, Italy’s biggest manufacturer, is stepping up temporary layoffs as tighter credit and slumping consumer confidence holds back demand for its cars. Fiat will shut three of its biggest Italian plants for two additional weeks. The carmaker also announced it will temporarily lay off 48,000 workers, more than half its Italian staff, through Jan. 10.

“We’re going to slam the brakes on, use as many temporary layoffs as needed,” Fiat Chief Executive Officer Sergio Marchionne said in an interview with Automotive News Europe on Dec. 6.

Confidence Wanes

The fallout from the yearlong credit crisis is not only affecting manufacturers. Banca Popolare di Milano SpA, an Italian regional bank based in Milan, plans to cut 400 jobs at its three retail banks as part of a cost-saving plan. Telecom Italia SpA, the country’s largest phone company, announced on Dec. 3 it will trim another 4,000 jobs after paring its revenue forecast. The company and unions agreed in September on a plan to eliminate 5,000 positions by 2010 on a voluntary basis.

Rising unemployment is weighing on consumer confidence, which fell to the lowest in three months in November, and business confidence that slipped to the lowest in more than 15 years in the same month. The Bank of Italy estimated today that household wealth shrunk 6 percent in the first quarter of this year amid declining stock markets.

To boost spending and confidence, Prime Minister Silvio Berlusconi’s government on Nov. 28 unveiled an 80 billion-euro ($115 billion) economic stimulus plan that includes cash payments to low-income families. The government will also force banks to link new variable-rate mortgages to the European Central Bank’s benchmark rate, rather than money-market rates, which have surged. Last week, the ECB lowered its interest rate by three quarters of a percentage point to 2.5 percent.

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