Eurozone economy picks up pace in fourth quarter, but recovery still too weak to create jobs

The Associated Press

A woman receives a bill after paying for her fish at Lisbon's Ribeira food market, Tuesday, Feb. 11, 2014. Portugal, which uses the shared euro currency, was engulfed by the eurozone's debt crisis and needed an euro 78 billion (US$106.6 billion) rescue in 2011 to avoid bankruptcy as jittery investors deserted it. That money runs out in June, and the government is keen to re-establish access to markets before then. (AP Photo/Francisco Seco)

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By JUERGEN BAETZ, Associated Press

BRUSSELS (AP) — Europe's economy is growing faster, raising hopes for a sustainable recovery, but that may not be enough to bring sky-high levels of unemployment down anytime soon.

The economy of the euro bloc grew 0.3 percent in the October-December period from the previous quarter, the Eurostat statistics office said Friday. That was slightly more than expected and up from the third quarter's 0.1 percent.

The recovery remains tepid, however, at least by global standards. The eurozone's annualized rate of about 1.2 percent is less than half the U.S.'s 3.2 percent rate during the same period.

"While still far from dynamic, it is a step back in the right direction," said analyst Howard Archer of IHS Global Insight.

The eurozone is central to the global economy as Europeans are big buyers of goods from the United States and Asia. Uncertainty over the bloc's future in recent years weighed on growth and corporate earnings around the world.

Here's a look at the eurozone economy's vital signs:

— NOT ENOUGH TO CREATE JOBS

One of the biggest economic problems facing Europe is unemployment, particularly among the young in those countries at the forefront of the region's debt crisis.

The eurozone economy emerged from recession last year as its financial crisis eased, but employers haven't started hiring much. The unemployment rate has remained around 12 percent since late 2012.

As well as creating uncertainty in households and stifling consumer spending, unemployment is a burden to a country's coffers as the government pays benefits and misses out on tax revenue from payrolls and economic activity.

That pain is not shared evenly across the eurozone, however.

While unemployment in Germany is near record lows around 5 percent, it has jumped to massive levels in countries struggling with debt. In Greece, it has reached a staggering 28 percent, and about 25 percent in Spain. The situation among the young is even worse — in Greece, almost 60 percent of those under 25 were out of work.

"Even if the fourth quarter's slightly faster rate of growth is sustained, it will be many years before the record number of eurozone unemployed can be put back to work," said Bill Adams, an analyst with PNC.

The unemployment rate in the U.S., by comparison, has fallen steadily to a five-year low of 6.6 percent as of January.

— MORE COUNTRIES PICKING UP

The good news in Friday's growth figures is that they show improvements across most economies.

Growth was unexpectedly strong in the bloc's major economies like Germany, France, Italy — which saw its first growth since 2011 — and the Netherlands.

But even Spain and Portugal — which needed rescue loans to rescue banks and the government, respectively — are showing signs of life.

"The eurozone's recovery has moved up a gear," said Chris Williamson, an analyst with Markit.

— NOT ALL SECTORS CONTRIBUTING

While Friday's report did not break down growth by sector, recent indicators show exports continue to be key for the bloc. That's particularly true for Germany, traditionally a big trader of high-value goods like cars and machinery.

Consumer spending, on the other hand, has been disappointing across the eurozone, particularly over the recent holiday months, as has industrial production.

On the plus side, forward-looking surveys show business confidence is rising and companies are ready to invest more.

— MEAGER OUTLOOK

The recovery is expected to remain modest this year.

The European Commission, the EU's executive arm, predicts growth of 1.1 percent for the eurozone and 1.4 percent for the broader 28-country EU, which includes nations like Britain and Poland that don't use the euro.

Most analysts forecast growth of around 1 percent for the eurozone: Probably not enough to lift many out of unemployment, but it would still be the bloc's best performance since 2011.

That would still pale in comparison to the U.S. economy, which some expect to grow 3 percent this year, its strongest performance since 2005.