Although the rate of inflation in the European Union and the Eurozone continues to rise, thus increasing the risk of a slowdown in economic growth or even the onset of a recession, the European labour market is still showing strong resilience.
And this both from the point of view of the development of the unemployment rate and from the point of view of employment. The share of jobless people in the European Union remained at six percent in June, which was the same as in May. The unemployment rate in the eurozone also remained stable, at the level of 6.6 percent. Year-on-year, however, unemployment decreased by 1.3 and 1.2 percentage points, respectively. In absolute numbers, there were 2.3 million less unemployed in the EU and 1.96 million less unemployed in the eurozone than in June 2021, according to current Eurostat data.
The Czech Republic traditionally has the absolute lowest unemployment rate, at 2.4 percent. It is followed by Poland (2.7) and Germany (2.8). On the other hand, Spain (12.6 percent) and Greece (12.3) face the largest share of unemployed persons. These are the only two countries in the European Union that have a double-digit unemployment rate.
It is also good news for the EU labour market that more and more people are working. Employment increased in the second quarter both year-on-year and quarter-on-quarter. However, the increase in employed persons slowed a bit, which may be related to the slightly weakening growth of the European Union economy. While in the first quarter employment increased by 0.5 percent quarter-on-quarter, in the second quarter it was only by 0.3 percent. The year-on-year increase also slowed down, from 2.8 to 2.3 percent within the European Union, current Eurostat data show.
However, the risk for the future development of the labour market in group of 27 countries is a further slowdown of economic growth, or even the entry of the EU economy into a technical recession. Isabel Schnabel, a member of the Executive Board of the European Central Bank, spoke about such a variant in a recent interview for Reuters.
„I do not see any indication of a prolonged, deep recession at the moment. It’s not even clear that there's going to be a technical recession in the euro area at all. I would just not rule it out,“ she said. Schnabel identified high inflation as a risk, which „will stay with us for some time." According to her, inflationary pressures will not vanish quickly.
According to GTA GT, the development can have a negative impact on the labour market, even if a possible economic recession usually influences the labour market with a delay. Moreover, it is possible that there would not be such a dramatic increase in unemployment as after the financial crisis of 2008 and 2009. But it will depend on how quickly it is possible to reduce inflation, or how tough the restrictive policy will have to be. The stricter the restrictions, the higher the risk that unemployment will start to rise more significantly.
Analysis by GTA GT
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