Economy in Brief

Just the facts ma’am- Inflation has overshot the European Central Bank's target (of 2%) for 33 months in a row. Now, with the unemployment rate in the Monetary Union at 6.5%, the lowest level it's seen since the Monetary Union was formed, the ECB is preparing to cut rates. REALLY!!

Curiouser and curiouser- I cannot stress enough what a curious situation this is, especially because the ECB, unlike the Federal Reserve, has a mandate that focuses only on inflation and has no reference to growth or to full employment or the unemployment rate.

Alice in blunderland? It's as though central bankers have stepped through the looking glass and found themselves in a world quite different from the one, they used to inhabit. Once, their principal responsibility was price stability. Suddenly, they seem far more infatuated with preserving low rates of unemployment that in the past proved to be (1) elusive, (2) sustainable, and (3) even dangerous, to pursue. “I was so much older then, I’m younger than that now?” (Dylan excerpt)

A new low in unemployment or policy judgement? The unemployment rate in the monetary union has been at 6.5% in 11 of the last 12 months. This is the lowest unemployment rate the monetary union has experienced in its existence. In October 2023, there was a hiccup in which the unemployment rate moved up to 6.6% for one month and then it moved back down to 6.5% - hence 11 out of 12 months at 6.5%- hic!

A festive labor market for all…almost all The table produces statistics for 12 of the oldest EMU members. It shows unemployment rate data ranked from 1994 to date. The unemployment rates for these twelve members are below their medians for every single member except for tiny Luxembourg whose unemployment rate stands at its 78.8 percentile and has been higher only about 21% of the time. By contrast, the monetary union has never seen an unemployment rate lower than this. Belgium has seen an unemployment rate lower than its current 5.5% only 7.6% of the time. Ireland has seen its unemployment rate lower than its 4.2% only 5.5% of the time. France has seen its unemployment rate lower than its 7.4% only 8.1% of the time… and so on. Unemployment rates across the monetary union, where they are not low in absolute values, they are low relative to each country's historic experience. For example, Greece has an 11% unemployment rate; it has been lower than that only 28.5% of the time. Spain's unemployment rate at 11.5% has been lower than that only about 24.4% of the time.