Italy Unemployment Rate Rises to 3 1/2-Year High

By Lorenzo Totaro

Sept. 22 (Bloomberg) -- Italy’s unemployment rate rose in the second quarter to the highest since 2005 as Europe’s fourth- largest economy failed to recover from its worst recession since World War II.

Joblessness increased to a seasonally-adjusted 7.4 percent from 7.3 percent in the previous quarter, the national statistics office Istat said in Rome today. That was less than the median forecast of 7.7 percent in a survey of 14 economists by Bloomberg News. The rise in the jobless rate was contained by more people giving up looking for work, and the report showed the number of employed fell the most since 1994.

“There are signs of an economic pickup this year, but the road to full recovery looks like a bumpy one,” said Luigi Speranza, an economist at BNP Paribas in London. “Companies will be cautious in hiring staff and may keep firing people, with serious effects on the labor market.”

Italy contracted for a fifth-straight quarter in the three months through June while Germany and France, the euro region’s biggest economies, both expanded 0.3 percent. Companies such as carmaker Fiat SpA reduced output and jobs, while banks including UniCredit SpA, the country’s biggest lender, plan further cuts for this year and next.

The number of employed fell by 1.6 percent, the biggest drop in the number of employed since 1994. That was the equivalent of 378,000 losing their jobs in the second quarter, today’s report said. The number of unemployed rose to 1.84 million from 1.7 million a year earlier.

Job Cuts

The unemployment rate may exceed 10 percent in 2010 should the recovery remain weak, the Organization for Economic Cooperation and Development said in a Sept. 16 report. The rate will reach 9.5 percent next year with the economy expanding 0.8 percent, employer lobby Confindustria forecast this month.

UniCredit has reduced staff in the retail unit in Italy and abroad by 1,800 since the beginning of the year. It will cut another 400 jobs by year-end and about 2,000 in 2010, Deputy Chief Executive Officer Roberto Nicastro said in a Sept. 18 interview in Bologna, Italy.

Fiat, the country’s biggest carmaker and private employer, said on July 22 that it plans to continue cutting jobs to help reduce costs. Fiat, which runs five auto plants in Italy with a workforce of 31,000, will end car production at a factory in Sicily and reduce positions at its CNH Global NV agricultural and construction-equipment unit, the Turin-based manufacturer said on June 18.

Earlier this year, the government introduced subsidies that expire at the end of December for people who scrap their old car for a new, energy-efficient model. Fiat Chief Executive Officer Sergio Marchionne said on Sept. 16 that if the incentives are not renewed next year, “we’re just going to have to shut down plants and idle them until demand resumes.”

‘Serious’ Problems

Italy’s business confidence reached a 10-month high in August on signs that the incentives boosted orders. Industrial production rose more than economists forecast in July, adding to evidence that the recession may start to ease later this year.

The pace of growth of Europe’s fourth-biggest economy has lagged behind its peers in the euro-region for more than a decade as investments, imports and exports declined, aggravating the effects of waning productivity and competitiveness.

Economists such as Nouriel Roubini, the New York University professor who predicted the financial crisis, remain pessimistic about the future of Italian growth. “Unless economic reforms and structural reforms are undertaken at a faster rate, economic growth is going to remain low and problems with unemployment and the job market will remain serious,” Roubini said in a Sept 4 interview.

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net