EMU Unemployment Is Still at a Low Level and Easing

Unemployment remains low in the euro area in September. It is tied for its all-time record low since the union was formed. So, the ranking of the rate is in its 0.3-percentile that says it has been this low or lower only 0.3% of the time. That is much lower than for any EMU member in the table. The lowest ranking (highest standing) in the table is Italy at 1.6% followed by Ireland at 7.4%. The reason the EMU rate ranks so much lower is that it is the confluence of all these low unemployment rates that is unusual making the EMU-wide rate even lower.

Trends The sequential trends from 12-month to 6-months to 3-months shows five of 12 countries in the table with falling rates of unemployment. Only four show unemployment falling on balance over six months with one having unemployment unchanged. Five have unemployment unchanged over three months as well. This shows the trend for unemployment rate to fall is still in place and that may seem surprising given the weakness in some of the recent economic data from Europe. Of course, one reason for this is also that Europe’s large economy Germany has its unemployment rate rising over 12 months and six months and it is on a different trend that the EMU area- that seems unsustainable.

Over the most recent three months, we see the unemployment rate falls in six countries month-to-month in August compared to only three in September. September has five countries with the unemployment rate rising that compares to only three in August.

The labor market trends may be running out of gas as far as lowing the unemployment rate is concerned. Still, the ECB is still cutting rates to provide economic support. But the labor trend does not show decay sequentially. The annualized monthly drops are all in the same ballpark for 12-month, 6-month, and 3-month changes. But the situation with Germany needs to be resolved since it will be hard for the euro area to perform well if Germany can’t.