Unemployment Rates Still Falling in EMU

Unemployment fell in the EMU in July to 6.4% from 6.5% in June. The EMU rate has fallen over three months, over six months, and over 12 months.

Rate trends run mixed Among the 12 long-standing EMU members in the table, unemployment rates fell in four of them in July and rose in three. Over three months, 6 of 12 unemployment rates fell (with two unchanged). Over six months, five of 12 fell (with three-unchanged). Over 12 months, four of 12 fell with two unchanged. The Monetary Union is experiencing what is probably the late stages of unemployment rates settling lower as other members see unemployment rates beginning to rise. In Germany, the unemployment rate has been rising by four-tenth of a percentage point over 12 months, the same as Ireland; there is a six-tenth rise in Luxembourg, and a one-percentage point gain in the Netherlands and in Finland.

On the other side of the coin, unemployment rates over 12 months fell by 1.3 percentage points in Italy, by 1.2 percentage points in Greece, and by 0.5 percentage points in Austria and in Spain.

There has been a focus on how weak conditions remain in Europe, especially because Germany and its industrial gauges have been so persistently weak, but the unemployment trends tell a different story of mixed trends- with a number of still very economic-friendly trends in play.

Unemployment rate levels in EMU are low Moreover, the level of unemployment rates in the EMU is low. Only Luxembourg and Finland have unemployment rates above their respective medians on data back to 1995. Six reporters in the table have unemployment rates that rank in the bottom 20th percentile of their historic results since 1995. Three others congregate near the border of their lower 25th percentile boundary. Unemployment rates in the EMU are undeniable low with few exceptions.

Even so rates are clearly rising for some countries, most notably, Europe’s largest economy, Germany.

In many comparisons of data with January 2020 conditions today do not compare favorably to what they were before Covid struck but for unemployment rate comparisons, we find seven of these reporting EMU members have unemployment rates lower than they were before Covid struck. While many industrial comparisons and confidence comparisons show that current conditions are worse, on this comparison, unemployment rate comparisons are considerably more upbeat. Luxembourg is minor exception with its rate one-tenth of a percentage point higher, Belgium and Germany are two more exceptions with their respective rates higher by just two-tenth of a percentage point. Austria’s unemployment rate is higher by 0.5 percentage points and Finland’s rate is higher by a sizeable 1.7 percentage points.

Unemployment elsewhere... For comparison, I include unemployment rates for the U.S., the U.K., and Japan. The U.K. claimant rate is much higher with an 82.3 percentile ranking. All three of these countries have unemployment rates higher in July 2024 than in January 2020.

Summing up Unemployment is a slow-changing, lagging, sticky variable whose performance may be tracing out the last of the good news for those countries showing unemployment rate declines. And with industrial data still weak, there is a tendency for that to be in train. Still, central banks have started to cut rates then have stopped. The potential for more stimulus is there. But inflation must behave to unlock the next step…will it?