Haver Analytics
Haver Analytics
| Nov 03 2023

EMU Unemployment Ticks Higher in September

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.

Has the worm turned?

Good conditions give way to challenges- The overall monetary union unemployment rate is lower than this only about 2.1% of the time; it's not surprising we're starting to see evidence that declines in the unemployment rate are running out of gas across monetary union members. In addition, this is a time when inflation has overshot the ECB's target and the central bank is raising rates, trying to slow things down and so there's an active resisting force against unemployment rates falling further. The ECB still has work to do. And the monetary union is still troubled by the ongoing war at its borders between Russia and Ukraine. The new conflict in the Middle East doesn't make things any easier.

The worm turns? The data clearly show that the breadth of unemployment drops is narrowing and being reduced as the number of countries seeing declines in the unemployment rate is becoming scarce. And there's a clear transition to countries reporting unemployment rates moving higher. In the table, there are 6 monetary union members that have not seen their unemployment rate drop over three months, over six months, or over 12 months. Those members are Austria, Belgium, Finland, France, Luxembourg, and the Netherlands. Even within this group, there is no sign that the unemployment rates are marching relentlessly higher or moving higher at an accelerating rate. But Austria, Finland, and the Netherlands each show the unemployment rate higher on all three of those periods. Conditions in the monetary union clearly are changing.

  • Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media.   Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.

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