Economy in Brief

The unemployment rate in the European Monetary Union had reached a new low at 6.5% in March, down from 6.6% in January and February. On data back to the year 2000, Germany and France both have new low levels of unemployment. All the members of the monetary union listed in the table with the exception of Luxembourg report unemployment rates that are below their historic medians. Luxembourg is above its median by a small amount with a rank percentile standing at its 52.9 percentile; it's median occurs at its 50th percentile.

Among the twelve countries that report in the table, only two show about employment rates that are not below the 30th percentile in ranking; Luxembourg and Spain whose standing is at its 31.7 percentile. Portugal is close at the 29.4 percentile, Austria is at the 25.6 percentile with Greece at a 24.8 percentile standing.

There also are rank percentile standings below their 16th percentile – seven of them. Unemployment rates continue to broadly fall in the European Monetary Union despite high inflation and despite ongoing rate hikes by the European Central Bank. There are other central banks in Europe hiking rates as well as a substantial array of hikes is being executed in the United States – hikes from the U.S. continued at the Fed’s meeting today.

Rate declines in EMU Among the 12 reporting EMU countries, all but four have unemployment rate declines over three months; two of them, the Netherlands and Luxembourg, have no change in their unemployment rates over three-months. Over 6 months all but three countries have declines in their unemployment rates and over 12 months all but five countries have declines in their unemployment rates among the twelve European Monetary Union countries listed in the table.

In comparison, the United States has a decline in the unemployment rate in March. On the same timeline, it has an unemployment rate that is in the bottom 2% of all unemployment rates since 2000. The U.S. employment rate is unchanged over three months and six months, but it's lower by one-tenth of one percentage point over 12 months.

The unemployment rate profile that we see in Europe is surprising in part because inflation rates in Europe remain so high - although the rate hikes in the United States have been more extreme than in Europe and the U.S. unemployment rate has remained low, unemployment rates in Europe surprise in the wake of ECB policy as well. In the European Monetary Union, the unemployment rate has fallen by 3-tenths of a percentage point over 12 months, more than it's fallen in the U.S.

Month-to-month manufacturing PMI changes were mixed in April with increases in eight of 18 observations (two unchanged by assumption because of missing data). Except for the U.S., the largest economies generally worsened in the month (Euro Area, Germany, France, the U.K, and China).

The progression to better (or less bad) conditions is clearer looking at three-month changes. The three-month averages of the manufacturing PMIs show weakening compared to 6-months in only 5 of 18 categories. Over six months things shift again, and PMIs are better in only 6 of 18 categories. Over 12 months, this trend continues as only 5 of 18 are better.

These metrics underscore that the current progression to ‘better’ (...or not as bad) is relatively recent and that the concept of ‘better’ applies just to comparisons over very recent months since over 6 months and 12-month conditions broadly are worsening.

That is hardly surprising… When we turn to engage with the column on rank or queue standings of the level of diffusion readings, weakness is the overpowering result. The median standing is a 24-percentile standing; that places the median for the group in the bottom 25 percentile of all observations since January 2019 – that is an extremely weak median.

One version of this month’s data is that there is some sort of revival going on… another version is that… “Well, yes, things are better, but not by much.” I am much more in the second camp than in the first camp. Still, it is notable that central banks have been hiking rates and inflation remains far too strong in most countries/regions and yet there has been some improvement in economic activity. Even if it is a minor effect, it is contrary to expectations and for that reason still notable.

The median manufacturing PMI value for each of the last three months as well as each of the three sequential periods referred to above, the PMI medians all are below 50 – indicating that contraction is most common.