Economy in Brief

Low and stable unemployment The unemployment rate in the European Monetary Union (EMU) in January stands at 6.7%, the same place it stood in December and has stood for three months in a row and in nine of the last 10 months. That is excellent stability. If we rank the level of the unemployment rate since the mid-1990s, the level of the unemployment rate has been lower in the EMU only about 3.2% of the time. That marks this rate as exceptionally low.

Are trends deteriorating? However, there's evidence that some of the strength, as well as the trend improvement, in the labor market are losing momentum in January. Of the 12 monetary union countries that report in the table, only two show lower rates of unemployment in January compared to December. In December, three countries showed lower rates of unemployment month-to-month. In November, there were four countries that logged lower rates of unemployment than the month before. The tendency for unemployment rates to fall is diminishing.

In January, there were six countries for which the rate of unemployment increased month-to-month. This compares to three countries that had that characteristic in December, and five in November. So far, the increases in unemployment rates month-to-month have been small or have occurred in countries with small labor markets. They have not changed the trend or overall level of the rate turning by upward for the EMU-wide unemployment rate.

Broader, sequential trends Looking at the broader data over three months compared to six months, four countries show declining rates of unemployment compared to six showing increasing rates of unemployment. Comparing the six-month change in unemployment to the change over 12 months, five countries show lower rates of unemployment over 6 months compared to 12 months and six countries show higher unemployment rates over 6 months compared to 12 months. Comparing the changes over 12 months to the changes that occurred over 12 months a year ago, we find that unemployment rates are lower in six countries on this basis and higher in six countries on this basis – a standoff. The overall rate for the European monetary system shows a decline of 0.2 percentage points over 12 months, an unchanged performance over 6 months and an increase in the unemployment rate by one tenth of one percentage point over 3 months.

Unemployment progress has a long track record of success The overall unemployment rate, as noted above, is still extremely low; the EMU-wide unemployment rate compared to January 2020 before COVID struck is now a half a percentage point lower. Only four of twelve countries have higher unemployment rates today compared to January 2020. Looking back from the mid-1990s, only two countries in the table have unemployment rates that are above their historic medians on that timeline; and those are Austria and Luxembourg. Meanwhile, four countries have unemployment rates that rank lower less than 10% of the time that mark them as countries with extremely low rates of unemployment (Germany, France, Ireland, and the Netherlands).

S&P manufacturing PMIs for February show a much more mixed bag than in previous months. Of the 18 reporting entities in February, 11 improve month to month. So, on a country count, there are more improvements than deteriorations. However, looking at the median level month-to-month, it is still lingering below ‘50’ indicating contraction in the lexicon of diffusion indexes - even though the median value does improve slightly month-to-month. As I noted, a mixed bag.

Sequential data also show complicated trends. The average PMI for manufacturing over three months is slightly better than over six months but only by a tick comparing 48.5 to 48.4. That's still showing a sector decline in terms of PMI diffusion index values. Over six months only 5 reporters show improvement compared to 12-month values. There is net deterioration over 12 months where there are only 5 reporters out of 18 that improve compared to 12-months ago.

Despite the slight firming on the month, there is continued contraction in manufacturing being reported although the contraction being reported is quite small. Still, the median queue standing that evaluates the current month has a standing compared to where it's been since 2019 at its 37th percentile. On that timeline back to January 2019, only six of 18 entries show percentile standings above their historic medians. On that span, the median is marked by a 50-percentile standing. Oddly - and interestingly- China and Russia both claim 98 percentile standings on the period, the highest in the group. Part of that is a reflection of how weak they have been.

The changes since COVID arrived, back to January 2020 levels, show there are eight reporting regions that have current manufacturing PMI values above their January 2020 levels: that’s over a span of three years. There's been very little growth overall as the median change has been a decline of 0.2 in the median PMI index.

Asian reporters in the table have fared better than the whole group overall. They log an average PMI value of 50 in February and sequential averages from 12-months, to six-months, to three-months show a progression higher. Their percentile standing at the 48th percentile is higher than the median for the group. China’s improvement and exit from a zero Covid strategy is helping.