Declining EU unemployment boosts hopes for a rebound in the labor market
The number of unemployed in the EU fell by 382,000 in May, which reinforced optimism about the region’s labor market rebound, as manufacturers said they were hiring at the fastest rate in 20 years.
Eurostat said on Thursday that the unemployment rate in the euro zone fell for the third consecutive month, from 7.4% to 7.3%. The unemployment rate has fallen from its peak of 7.7% in September last year, but it is still higher than the pre-pandemic low of 6.6%.
Claus Vistesen, an economist at Pantheon Macroeconomics, stated that after the EU’s unemployment rate fell “significantly” to 15.3 million in May, the unemployment rate “is clearly on a downward trajectory, falling year by year over the past three months. “.
According to the monthly IHS Markit Purchasing Managers Index (PMI) survey released on Thursday, European manufacturers said they are hiring new employees at the highest rate in at least 20 years.
These announcements are the latest signs of optimism in the European labor market, as millions of people took part in state-subsidized vacation programs last year and people began to return to work.
IHS Markit said that the hiring intentions of Eurozone manufacturers in its June survey have grown at the fastest rate in the 24-year history of the PMI survey. Austrian and Dutch companies are leading the way in terms of job growth.
Chris Williamson, chief business economist at IHS Markit, said: “We have also seen record-breaking employment growth and greater capital expenditures for commercial equipment and machinery to expand production capacity.”
The improvement in employment data may increase the doubt among economists about whether the recent increase in inflation will be longer than expected by the European Central Bank, especially if the rising cost of living and falling unemployment push up wages even more.
In the Eurozone, the unemployment rate fell from 8.1% last month to 7.9% in May, which is far lower than the 8.5% peak in August last year.
The youth unemployment rate in the EU also fell from 18.2% last month to 17.3% in May.
Thursday’s data does not include the government’s vacation plan caused by the coronavirus, which supports millions of jobs, which means that official data deviates from a comprehensive measure of labor market health.
However, national data shows that the number of workers paid with government funds is also declining. On Wednesday, German data showed that the number of workers on leave in April fell to 2.3 million from nearly 6 million a year ago.
Similarly, in France, the number of workers on leave fell from 3 million last month to 2.3 million in May. In Spain, the number of workers on leave in early June fell to 540,000 from 3.5 million in April 2020.
More timely sentiment indicators support an optimistic outlook. According to the monthly business survey released by the European Commission earlier this week, employment in Eurozone companies is expected to rise to the highest level since 2018 in the service and manufacturing industries.
Data from the employment website Indeed also pointed out that online job vacancies in the euro zone’s largest economy increased rapidly in June.
Many economists have worried that with the gradual cancellation of vacation plans and the lifting of the Italian dismissal ban in mid-August, the number of unemployment in Europe will rise this year.
“Although with the gradual reduction of government support for enterprises, some workers may lose their jobs, but we think it may be very small,” Capital Investment macro economist Jessica Heides said. “The strength of the recovery provides hope that the unemployment rate will continue to fall from here.”
According to data from Consensus Economics, economists recently lowered the euro zone’s unemployment rate forecast for this year and next year to just over 8%, which is lower than the peak of 9.4% predicted in November last year and the lowest level since the pandemic began. Average expectations of leading forecasters.
Despite the rapid improvement in the job market, wage inflation pressures remain low in most parts of the Eurozone. According to a survey conducted by the European Commission, a small number of companies reported that labor shortages hindered production in June. The highest rate in the country is in Germany, and only one in five companies has reported such problems.