Economy in Brief

In September, the unemployment rate rose in the European Monetary Union to 6.5% from 6.4% in October. The rate had been chopping around between 6.5% and 6.4% over the last four months. There's nothing decisive about this rate increase except that the rate has stopped moving lower. The unemployment rate has gone from its trend of persistent declining to a period of waffling and failing to be able to make a new low. This begins to look more like the end of a run for the declines in the unemployment rate and the European monetary system. And given how far the decline has come, it's not surprising.

Some members still experience falling rates of unemployment- In September the unemployment rate fell in only one monetary union member in the table, and that is Greece where the unemployment rate fell quite significantly from 10.6% in August to 10% in September. Greece has the second highest unemployment rate in the table exceeded only by Spain at 12% in September. Greece is the only country in the table with the unemployment rate falling for three months in a row. Greece is also the country that is making the most progress overall in reducing its unemployment rate that is lower by 2.1 percentage points over 12 months. Among the twelve countries in the table, only five have net-lower unemployment rates over 12 months. That pack is led by Greece, followed by a 0.9 percentage point decline in Spain, a 0.6 percentage point decline in Italy, a 0.2 percentage point decline in Ireland, and a 0.1 percentage point decline in Germany.

Broadly low rates across the monetary union- The lowest unemployment rate in the monetary union among countries in the table is Germany at 3%. However, the lowest ranking unemployment rate in the table belongs to Ireland where its 4.2% unemployment rate sits in the lower 5.5 percentile of its historic queue of unemployment rates. That compares to a 6.7% standing for the nominally lower German rate. It points out that the relativity in these unemployment rates differs across countries and helps to explain why for the monetary union the overall EMU rate standing is at 2.1 percentage points, a lower standing than any country in the table. It's because the coincidence of low unemployment rates across all these countries is very unusual and has contributed to an unusual and extremely low unemployment rate for the monetary union itself.

Declining unemployment rates are becoming scarce- However, declines in unemployment are becoming rarer over three months; only two countries have unemployment rates lower over three months; they are Ireland and Greece. Over six months, four countries have lower unemployment rates: Portugal, Greece, Spain, and Italy. Over 12 months, unemployment rates fell in five countries and rose in seven countries.

Below-median unemployment rates are a common feature- Still, unemployment rates across the monetary union are low; they're below the medians for all countries except two. Only Luxembourg and Austria among country members in the table log employment rates above their 50-percentile mark which means they're above their historic medians for this period.

Inflation in Switzerland continued post solid low inflation numbers as the headline rose 0.1% in the HICP measure for the third month in a row. The Swiss CPI measure rose by 0.1% in October, the same as in September and compared with a 0.2% increase in August. Switzerland’s core measure rose 0.2% in October after being flat in both September and August.

Switzerland continues to have outstanding inflation performance and continues to consistently outperform Germany as well as the European Monetary Union in this regard.

Sequential inflation rates measured on the HICP scale show 2% inflation over 12 months, decelerating to a 1.7% pace over six months and decelerating to a 1.1% annual rate over three months. The Swiss CPI is up by 1.7% over 12 months and at a 0.9% pace over six months; it accelerates to a 1.5% annual rate over three months. The Swiss core rate is up by 1.5% over 12 months, and at a 0.5% annual rate over both six months and three months.

These numbers are the envy of all other central banks during this period. Globally, inflation has flared, and central bankers have overshot their targets consistently. Switzerland has been able to contain inflation better than in other central banks.

Looking at the inflation rate annualized since January 2020, before COVID struck, the Swiss HICP measure is up at a 1.8% annual rate; the domestic measures is up at a 1.8% annual rate as well; the Swiss core rate is up at a 1.2% annual rate. Excluding Swiss administered prices, inflation is up at a 1.7% annual rate over the same span.

Inflation detail for October shows some acceleration for inflation month-to-month. The core rate is up to 0.2% compared to a 0 percent change in September. Excluding administered prices, inflation rose by 0.3% in October compared with a 0.1% decline in September. Food & beverage prices rose 0.4% in October compared to -0.2% in September; health costs were flat in October after falling by 0.1% in September; recreation & culture events saw prices rise by 0.3% in October after falling by 0.1% in September. The catch-all ‘other goods and services’ saw prices rise by 0.2% in October after being flat in September. None of these changes is particularly concerning in the monthly report.

Over three months, the Swiss HICP measure decelerates, the Swiss core measure is unchanged, compared to its six-month pace and the Swiss domestic headline measure accelerates to 1.5% after a 0.9% rise over six months. Categories showing prices accelerate over three months compared to six months across the board. Accelerating most sharply over three months are clothing & footwear prices that rose at a 35.1% annual rate, but the series is not seasonally adjusted. There is acceleration posted in transportation as well as in health and recreation categories; however, among these three categories two of those three log price declines on the month. Yet all three categories show price acceleration because prices declined substantially over six months! Education costs accelerated and they're also not seasonally adjusted, but they rise from a 1.8% pace over 12 months to a 3.6% pace over six months to an annual rate of 7.3% over three months. That progression is suggestive of true underlying price pressures. The other goods & services category shows consistent pressure but just by a tick period-to-period.

The Swiss unemployment rate remains low at 2.1% in September, the same as August six-months ago. The rate had been as low as 1.9%; a year ago it was at 2.1% and two years ago it was at 2.9%. Since COVID struck in January 2020, the unemployment rate is lower by 1.4 percentage points. The Swiss economy is performing very well on the inflation front. But in real terms, the economy is beginning to experience some slowing even though it is not reflected in the rate of unemployment yet.