Economy in Brief

The global manufacturing sector showed uneven results in August with some of the larger economies showing some improvement, such as the euro area, Germany, France, and Japan. However, the U.K. and the U.S., both relatively large economies, show backtracking.

Among these 18 early reporting economic units, 10 of them show improvement in August. Looking at the changes in the manufacturing diffusion indexes between three-months and six-months shows improvement in six countries. Looking at the changes between six-months and 12-months, 10 countries show improvement. Looking at the changes between now in 12 months ago, there are only four that show improvements. Those four are Mexico, China, Russia, and India, but the data from Russia at this point are quite suspect since it is on a war-time footing. China, on the other hand, had been a long period of struggling as it has an entangled exist from Covid problems; it began to make some recovery. However, now it still struggles with various problems. China may not be an example of an economy on the upswing despite what the PMI trends are telling us. China does show deterioration over three months as does Russia.

We look at the median reading. The median for August is 48.8; this is slightly reduced from July's 49.2. However, August is still above June's level of 47.8. There's no discerning a trend from this choppiness. It's just clear that the manufacturing PMIs have been chopping around in an area below 50 showing some slight deterioration in the manufacturing sector, but there doesn't seem to be any trending in place. If we look at three-months compared to six-months compared to 12-months, we find the three-month average is at 48.5, just a tick higher than the six-month average at 48.4 which is the same as the average of 48.4 for 12-months. Once again, we get this sense the global economy has been frozen in this slight contraction phase that hasn't gotten better and hasn't gotten worse but with central banks fighting inflation and with this disruptive war going on between Ukraine and Russia. Given other geopolitical tensions, it's made the economic situation seem even more tenuous.

Unemployment rates in the European Monetary Union are stationary at 6.4% in July after falling in June to 6.4% from 6.5% in May.

Country level results: Among the twelve European Monetary Union members who report unemployment rates early, individual country unemployment rates fell in Belgium, Spain, Ireland, and Greece in July. Unemployment rates rose in Austria, Finland, France, Italy, and in the Netherlands. Broadly speaking, unemployment rates in the monetary union are trending lower. However, the data for July offer a cautionary tale regarding where trends are headed. At the bottom of the table, we provide reference unemployment rates for the United States, the up-to-date claimant rate of unemployment in the United Kingdom, and the unemployment rate for Japan. The U.K. and Japan both saw elevated unemployment rates in July compared to June. The U.S. rate continued to snake down after having seen a relatively sharp increase in the unemployment rate in May that has since unwound.

Sequential trends Sequential trends for unemployment rates show that for the overall European Monetary Union rate the unemployment rate is down by 0.3 percentage points over 12 months; it's also down by 0.3 percentage points over six months; it is lower by 0.1 percentage points over three months. Trends across countries show declines in the unemployment rate over 12 months, six months and three months for Italy, Ireland, Greece, and Spain. Portugal shows an increase over 12 months, with declines over six months and three months. Other countries show increases on all horizons; those are Austria, Finland, France, and Luxembourg. The Netherlands shows an increase over 12 months and three months, with no change over six months.

Ranking countries by their level of unemployment We can also look at the broad rankings for the unemployment rate. Here we find that all the monetary union countries except Luxembourg and Austria have an unemployment rate that ranks in the lower 50% of its distribution of unemployment rates (on data since 1994) marking them all as below their historic medians on this timeline. Belgium, Germany, France, and Ireland all have unemployment rates that are in the lower 10 percentile of their respective historic queues of unemployment rate observations. These are countries with exceptionally low unemployment rates compared to their own historic standards. Make no mistake: European labor markets are tight! Among the countries with unemployment rates below they're medians but somewhat higher, we have Greece with the 40.7 percentile standing, Spain with a 25.9 percentile standing and Finland with the 22.4 percentile standing. All of these are moderately low to still exceptionally low unemployment rates indicating strong labor market conditions across the monetary union- just about everywhere.