Eurozone unemployment fell by 112,000 in May to 16.267 million, the lowest level since August 2011. The unemployment rate dipped to 10.1%, down from a peak of 12.1% in the second quarter of 2013.
IHS perspective | |
Significance | Eurozone unemployment fell for a 20th successive month in May and by a decent 112,000. Furthermore, the 406,000 decline over the three months to May was the sharpest three-month drop since the three months to September 2015. |
Implications | The decent fall in Eurozone unemployment over the three months to May suggests that the pick-up in Eurozone GDP growth during the first quarter and seemingly reasonable activity in the second quarter may be feeding through to lift employment. There was also an improvement in Eurozone business confidence during April (and May). |
Outlook | In its June forecast, IHS projected the Eurozone unemployment rate to trend down gradually further to 9.9% by the end of 2016 and 9.5% by the end of 2017. However, there is obviously a danger that Eurozone labour markets will suffer a relapse if the UK's vote to leave the European Union takes an appreciable toll on growth and confidence. |
Seasonally adjusted Eurostat data show that Eurozone unemployment fell by 112,000 in May to 16.267 million, the lowest level since August 2011. This was a 20th successive monthly drop in the number of Eurozone jobless. There had previously been declines of 75,000 in April, 219,000 in March, 49,000 in February, and 96,000 in January. Unemployment fell in most Eurozone countries during May. Among the major individual Eurozone countries, there were drops during May in the number of jobless in Spain (60,000), Italy (24,000), Germany (8,000), and France (6,000).
It is encouraging that the reduction in the number of Eurozone jobless amounted to 406,000 over the three months to May. This was the sharpest three-month drop since the three months to September 2015. This suggests that the pick-up in Eurozone GDP growth to 0.6% quarter on quarter (q/q) in the first quarter of 2016 and seemingly reasonable activity in the second quarter may be feeding through to lift employment. There was also improvement in Eurozone business confidence during April and May (although it edged back overall in June).
The drop in the number of Eurozone jobless picked up to 364,000 in the first quarter of 2016 after slowing to 293,000 in the fourth quarter of 2015 from a record 528,000 in the third quarter. There had been declines of 244,000 in the second quarter of 2015 and 304,000 in the first quarter. The decline in Eurozone unemployment is likely to have slowed in the final months of 2015 and at the start of 2016 as a consequence of limited Eurozone growth in the second half of 2015 (0.4% q/q in the fourth quarter after 0.3% q/q in the third quarter) and softening business confidence in the early months of 2016.
At 16.267 million in May 2016, the number of Eurozone jobless was down by 3.066 million from the record high of 19.333 million seen in June 2013. Furthermore, the number of Eurozone jobless has come down by 2.247 million over the 18 months since November 2014. However, this overall drop in Eurozone unemployment needs to be seen in the context that the number of jobless had previously risen by 3.604 million to the June 2013 peak of 19.333 million from a low of 15.729 million in April 2011 as the Eurozone suffered six successive quarters of mild GDP contraction from the fourth quarter of 2011 to the first quarter of 2013.
Eurozone unemployment rate down to 10.1% in May
The Eurozone unemployment rate dipped to 10.1% in May, taking it down to the lowest level since July 2011. It has come down from 10.2% in April/March, 10.3% in February, and 10.4% at the end of 2015. It is also down from 11.0% in mid-2015, 11.3% at the end of 2014, and a record high of 12.1% in mid-2013.
The jobless rates in individual countries during May ranged from a low of 4.1% in Malta and 4.2% in Germany to a high of 19.8% in Spain, according to Eurostat data (which can vary significantly from national statistics). Cyprus recorded an unemployment rate of 12.0%, followed by Portugal (11.6%), Italy (11.5%), Slovakia (10.0%), France (9.9%), Latvia (9.7%), Finland (9.0%), Belgium (8.4%), Slovenia (8.1%), Lithuania (8.0%), Ireland (7.8%), the Netherlands (6.3%), Luxembourg (6.2%), and Austria (6.1%). The latest comparable data show unemployment rates of 24.1% in Greece during March and 6.4% in Estonia in April.
Employment rising
The most recent hard data from Eurostat show that Eurozone employment rose for a ninth successive quarter in the first quarter of 2016, and by a relatively solid 0.3% q/q. This followed growth of 0.3% q/q in both the fourth and third quarters of 2015, 0.4% q/q in the second quarter, and 0.2% q/q in the first quarter. Consequently, Eurozone employment was up 1.4% year on year (y/y) in the first quarter of 2016, which was up from y/y gains of 1.2% in the fourth quarter of 2015, 1.1% in the third quarter, 1.0% in the second quarter, and 0.8% in the first quarter.
Outlook and implications
There is obviously a danger that Eurozone labour markets will suffer a relapse if the UK's vote to leave the European Union in its 23 June referendum takes an appreciable toll on growth and confidence, as IHS fears. Prior to the UK vote, IHS had expected Eurozone unemployment to trend downwards gradually over the coming months to 9.9% by end-2016 and to 9.5% by end-2017, with varying performances across countries. Although Eurozone GDP growth accelerated in the first quarter of 2016, companies in several countries remain wary of just how robust growth will be over the longer term, so the upside for employment is likely to be limited. Firms are aware of how difficult and costly it can still be to shed labour in some countries, which encourages caution in employment plans.
Eurozone unemployment had been expected to fall, as the cyclical economic upturn continues and business confidence is relatively decent in most countries. In our June forecast, we projected Eurozone GDP growth to come in at 1.7% in 2016 and then edge up to 1.8% in 2017. Meanwhile, overall Eurozone business confidence is still above its long-term averages and it improved overall in the second quarter after a marked relapse throughout the first quarter of 2016 according to the European Commission (it had reached its highest level since mid-2011 in December 2015). Employment expectations picked up to a six-month high among manufacturers in June and also improved for retailers. Less encouragingly, employment expectations softened among services companies to a 14-month low in June, although they were still above long-term norms.