EMU Fourth Quarter Growth Stalls as Unemployment Ticks Higher at Yearend

Growth in the European Monetary Union (EMU) came to a near standstill in the fourth quarter of 2024 as overall annualized growth expanded at a 0.1% annual rate, the smallest measurable rate that would appear on this table. Among the seven early reporting monetary union members in this table, six of them show growth decelerating in the fourth quarter compared to the third quarter. Overall weighted GDP for the monetary union decelerated from 1.6% at an annual rate in the third quarter to 0.1% in the fourth quarter growth. Growth rates were negative for France, Germany, Ireland, and Italy. However, pooling the four largest economies together produces a growth rate of zero in the fourth quarter compared to 1.1% in the third quarter. Spain’s 3.1% fourth quarter growth rate saves the Big-4 aggregate GDP reading from logging a negative number. Away from the four largest economies, the rest of European Monetary Union saw growth plunge lower to 0.4% at an annual rate in the fourth quarter from a 3.2% annual rate gain in the third quarter.

Growth conditions in the monetary union are poor. Ranking statistics put the performance of GDP growth in context. Only two countries in the table, Portugal, and Spain, have growth rankings above their 50-percentile mark which represents the median for each series over this period. The EMU has a growth rate ranking at its 32.6 percentile; that puts it in the lower third and its queue of ranked data. The four largest Monetary Union economies show a growth ranking in a 28.3 percentile, while the rest of the Monetary Union performs better with the growth ranking in its 40.2 percentile. These statistics compare to the United States that has an above median ranking at its 53.4 percentile over the same period.

Growth weakened in the fourth quarter and in December the unemployment rate kicked up to 6.3% from what had been at a historic low of 6.2% for the Monetary Union. In December, the number of unemployed rose in the Monetary Union as well as for the broader EU area. However, the unemployment level in the Monetary Union is still exceptionally low with the ranking at its 1.3 percentile, an extremely low ranking that occurs because of the breadth of low rankings across the various EMU economies. Among the 12-monetary union countries that appear in the table, only four have unemployment rates that rank above their medians: Austria with a 58.7 percentile ranking, Finland with a 58.4 percentile ranking, and Luxembourg with an 88.1 percentile ranking. The highest unemployment rate in the Monetary Union is from Spain. Its pace is historically one of the very highest and it continues to have double-digit unemployment at 10.6%. However, its unemployment rate continues to fall and is among the lowest, 15.1% of Spanish unemployment rates historically.

The far-right hand column also compares unemployment rates to their medians for the period. The typical European Monetary Union economy has an unemployment rate that is 20% to 30% below its historic median. This explains why the ranking for the overall unemployment rate for the Monetary Union is so low. That comparison is to a U.S. unemployment rate that is 18% below its median. The United Kingdom is no longer a member of the European Union; it reports a claimant unemployment rate that has steadied at 4.6% and has a 79.1 percentile ranking. It is 41.5% above its historic median.

Summing up These statistics tell us of some ramping down in growth that is substantial in nature across Europe and quite broad, but it's only begun to have a small impact on labor markets where the unemployment rate has just ticked up by 0.1% in December in the Monetary Union. In contrast, the U.S. unemployment rate remains low and actually ticked down in December. Right now, all eyes are on the U.S. because of the importance of that economy and the change at the helm and plans for substantial and perhaps draconian economic policy changes. These changes could have a big impact on the U.S. and the European economies and more broadly. The U.S. contemplates these changes - particularly changes in tariffs – that could have a severe adverse effect on Europe at a time that the European economy is slowing and struggling.