Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

19 Million People Now Jobless in the Eurozone

Monday, March 4th, 2013
By for Profit Confidential

Troubles in the eurozone could be here to stay.

The unemployment rate for the eurozone increased to 11.9% in January 2013—up from 11.8% in December of 2012. (Source: Eurostat, March 1, 2013.) Almost 19 million people are jobless in the eurozone.

The European Commissioner for employment and social affairs, Laszlo Andor, summed up the situation very clearly. He said, “Such unacceptably high levels of unemployment are a tragedy for Europe and they signal how serious of a crisis some eurozone countries are in.” (Source: Financial Times, March 1, 2013.)

Manufacturing in the eurozone is suffering, showing a continuous economic slowdown. The Purchasing Managers’ Index (PMI) showed a reading of 47.9 in February 2013—unchanged from January and deteriorating for the 19th consecutive month. (Source: Markit, March 1, 2013.) Any PMI reading below 50 represents contraction in the manufacturing sector.

Looking forward, as the economic slowdown deepens in the eurozone, I am focusing on stronger nations, such as Germany and France. They held their act together in the previous economic slowdown. But they are starting to deteriorate now, as the crisis in the region worsens.

France, the second-biggest economic hub in the eurozone, had a 10.6% unemployment rate in January.

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In Germany, consumer demand seems to be declining. New car registration in the biggest economy in the eurozone dropped 8.6% in January from a year earlier. (Source: Wall Street Journal, February 19, 2013.) France, Italy, and Spain also witnessed declines in new car registrations of 15%, 18%, and 9.6%, respectively.

Unfortunately, as the eurozone’s economy continues to head in the wrong direction, the consequences will be felt here in the U.S., and they will hurt America’s prospects for economic growth.

Dear reader, don’t forget that 40% of the S&P 500 companies do business in the eurozone. The continuous economic slowdown in the region will put a significant dent in their profitability. While the stock market may be reacting opposite to this, when the panic strikes, investors usually rush out of the markets very quickly. Investor beware!

Where the Market Stands; Where it’s Headed:

I continue to believe the stock market is putting in a top. I see the risk outweighing the rewards of investing in stocks at this point. Bullishness and optimism about the stock market is getting close to 2007 levels—and we all know what happened after that.

What He Said:

“I personally expect the next couple of years to be terrible for U.S. housing sales, foreclosures and the construction market. These events will dampen the U.S economic picture significantly in the months ahead, leading to the recession I am predicting for the U.S. economy later this year.” Michael Lombardi, PROFIT CONFIDENTIAL August 23, 2007. Michael was one of the first to predict a U.S. recession, long before Wall Street analysts and economists even thought it a possibility.

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Michael Lombardi - Economist, Financial AdvisorMichael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Some of the stock recommendations in Michael's various financial newsletters have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland. Follow Michael and the latest from Profit Confidential on Twitter or Add Michael Lombardi to your Google+ circles