Chart of the week

Despite slower growth, the unemployment rate has continued to fall in recent months. In May, it settled at 7.5%, just 0.2 percentage points above the low seen at the turn of 2007-08. Eurostat data is relatively recent, but OECD (1) data show that the last time unemployment rates were this low was at the end of the eighties.

OUR ANALYSIS

This broad-based fall in unemployment masks significant disparities. In eurozone countries such as Germany and the Netherlands, unemployment is at record lows. For the likes of France and Italy, although unemployment rates are falling, they remain close to their historical averages. And in the countries that were hardest hit by the eurozone crisis, unemployment remains high despite steep falls. Spain’s unemployment rate, for example, fell from 20.1% in May 2016 to 13.6% in May 2019.

The slight improvement in PMI (2) indices over recent months suggests growth will remain at reasonable levels and enable unemployment to fall further. In terms of labour costs, the impact is just starting to show: the salary scales defined by collective agreements as monitored by the ECB (3) were up 2.2% in the first quarter of 2019, the highest rise since 2009.

(1) OECD: Organisation for Economic Co-operation and Development
(2) PMI: Purchasing Managers Index
(3) ECB: European Central Bank

The opinion expressed above is dated July 4th, 2019, and liable to change.

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