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Economy in Brief

EMU Unemployment Continues Lower
by Robert Brusca  August 19, 2021

The virus continues to oscillate between being corralled and breaking loose. Fresh news that the vaccines show clear signs of losing potency are a matter of concern. But the data on unemployment show ongoing progress in reducing unemployment across Europe, and in the U.S. with only Japan as an exception. And challenges lie ahead.

Despite unemployment reduction taking January 2020 as the base for pre-Covid-19, unemployment rate levels show that among all the countries in the table only France has a lower unemployment rate in June 2021 than it had in January 2020. Every other country or area in the table is still trying to get back to the unemployment level it had before Covid struck.

However, countries continue to make progress toward that goal. In June, 12 of 13 countries experienced a drop in their unemployment rate. In May, it was the same count. In April, progress was uneven as eight countries showed a rise in their month-to-month unemployment rate or issued a rate that was unchanged.

Looking at EMU members, among the eleven there are nine net declines in unemployment rates over the last three months, eight net declines over six months and six net declines over 12 months. The countries failing to show unemployment declines over 12 months are Ireland, the Netherlands, Belgium, Italy, and Finland.

Unemployment rate levels in the EMU range from a low of 3.2% in the Netherlands to a high of 15.1% in Greece; in January 2020 the low rate in the EMU was again the Netherlands at 3% and the high rate again was Greece at 16.6%. One interesting aspect of the pandemic for the EMU is how for this group of countries average standard deviation across these members has been consistently low and stable during the Covid-crisis. The ranking of countries by unemployment rates 12 months ago is correlated with the current ranking at 0.78 (R-square of 0.64). That shows some consistency during of the impact of the virus on national policies over the past year. That may have made it easier to get policy consensus at the ECB and through the existing EU mechanisms.

Table 1

We often focus on unemployment rates, because they are somewhat easy to compare across countries especially where the same sorts of definitions for unemployment are used. But some countries have structurally different unemployment support programs and some have structurally different participation rates and so that the employment picture- a snapshot of how the number those at work has changed – might help to augment the overall picture and our understanding of events.

The EMU shows a huge hit to employment in Q2 2020 followed by strong gains – but not gap-closing gains- in Q3 and Q4; but Q1 brought some backtracking. The U.S. showed far more draconian job losses with its lesser safety net, as employment fell at nearly four time the pace as in the EMU then rebounded more strongly as well- more than proportionately stronger than in the EMU- and the U.S. job recovery lasted through Q1 2021 (and Q2 as well although not presented in the table). Over five years the EMU averages 0.6% per year employment gains compared to the U.S. (nonfarm) at -0.1%. Over five years Germany shows small net job gains while France and the U.K. post annualized losses.

Assessing Q1 2021 employment levels by comparing them to those before Covid stuck using a base of Q4 2019 shows that for every country and every sector - except construction in the EMU- employment levels are lower on balance in Q1 2021.
• EMU levels are lower by 2.1%.
• In the U.S., levels are lower by 5.2%.
• In Germany, levels are lower by 2.4%.
• In France, levels are lower by 2.0%.
• In the U.K., levels are lower by 5.0%.

As for the number unemployed...
• The number unemployed in EMU is higher by 7.9%.
• In the U.S., it is higher by 68.7%.

We can update these... we can top these figures up for the some of the totals.
• EMU employment figures for Q2 show a 2% gain and the job loss from Q4 2019 of 1.4%; number of unemployed rose of 5.5%.
• German figures also are available for Q2 2021; they show a 0.5% job gain in Q2 and an employment loss compared to Q4 2019 of 2.2%.
• U.S. data through Q2 show another employment gain of 2.9% and an employment loss since Q4 2019 at 4.5%. The number unemployed in the U.S. is still higher compared to Q4 2019 by a wide margin at 61.9%.

The clear progress depicted by the unemployment rates does not focus as brightly on the displaced as the data in this table. And participation rates can skew the results if workers become discouraged and stop looking for jobs thereby staying jobless but no longer considered unemployed. The assessment of unemployment in economics is in some ways simple, but measurement is always complicated by reality. As U.S. policies normalize and as the extra unemployment benefits stop being paid, we will see how much that policy has contributed to people in the U.S. withholding labor services and raising the unemployment rate. In any event, the experiences in the U.S. and in Europe have been very different so far.

Table 2: Employment Snapshot

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