Euro Zone Jobless and Inflation Rates Climb Higher

There was more bad news out of Europe on Thursday when the European Union's statistics agency Eurostat announced that unemployment in the euro zone had climbed to a euro era record high and inflation was on the rise too. Eurostat said that unemployment across the euro zone had reached 10.7 percent in January, up from 10.6 percent in December, and inflation is expected to rise to 2.7% in February, up from 2.6% in January. Not surprisingly, the unemployment numbers were worst in the euro zone countries that have been hardest hit by the euro zone sovereign debt crisis. Spain's unemployment rate was up to another European Union high of 23.3 percent. Greece, Ireland and Portugal also were reported to have extremely high unemployment levels. The job market in the euro zone is especially bad for young workers, with a jobless rate that is currently standing at 21.6 percent. Youth in Spain and Greece have it the worst, with nearly half of all young adults in those two countries currently out of work. The latest inflation figures for the European Union were also alarming. According to the Eurostat flash estimate, inflation is expected to rise from 2.6 percent in January up to 2.7 in February. Although that figure might not seem very high, it's well above the European Central Bank's (ECB) target of less than 2 percent. Unlike America's Federal Reserve Bank, the European Central Bank has one primary objective and that is to maintain price stability. So, it's unlikely that the ECB will lower interest rates in order to promote economic growth, especially at a time when inflation is climbing higher and well above the bank's official target. Rising unemployment across the European Union is likely to hurt demand as consumers have less money to spend and start saving more because the possibility of joblessness for them is increasing. This could be a blow not only to European Union economies but to those in Asia, which heavily depends on exports to the European Union. Earlier this year, the International Monetary Fund (

) warned China that the country's economic growth could be cut in half if Europe and the United States fell into recession. The combination of rising unemployment numbers and growing inflation is also likely to increase resentment to the austerity measures that many people blame for pushing the euro zone into recession. The austerity measures have been passed in countries like Greece, Spain and Portugal in order to receive financial help from the European Union. Sometimes this help comes in the form of an actual bailout, at other times it's buying bonds from the troubled euro zone countries to help keep their borrowing costs down. Although the governments of these countries reached out to the European Union to help prevent financial collapse, citizens of countries are beginning to feel that the austerity measures that their governments agreed to are doing the countries more harm than good. Social unrest is on the rise and if unemployment and inflation continue to move higher, the governments of troubled euro zone countries like Greece and Spain will come under increasing pressure to roll back the austerity measures and focus on promoting economic growth instead of cutting government services and raising taxes. As their economies fall further into recession, some of these countries are already taking steps to move to pro-growth policies and away from the unpopular austerity measures. With nearly half of their young adults out of work, Spain and Greece have been particularly vocal in trying to convince European leaders of the necessity of promoting economic growth. To them it's quite simple: austerity leads to less jobs, while economic growth is the creation of new jobs. If the unemployment rate continues to grow across the European Union, Europe's leaders might see the light and focus their efforts on policies that create jobs instead of policies that destroy them.