Euro Area: Unemployment rate further up in August, again held down by short-time work schemes

Euro Area Unemployment August 2020

Euro Area: Unemployment rate further up in August, again held down by short-time work schemes

Labor market conditions in the common currency block worsened again in August, although data released by Eurostat continues to show just a small portion of the deterioration. The number of unemployed people jumped by 251,000, and the unemployment rate increased to 8.1% in August from 8.0% in July.

Short-time work schemes involving a massive portion of the labor force across the Eurozone has prevented a jump in the unemployment rate so far. Moreover, discouraged people abandoning the active population are further contributing to contained jobless numbers.

That, said, looking at the countries with data available, 10 economies saw their unemployment rate increase in August, including France, the Netherlands and Spain. Meanwhile, 5 countries saw their unemployment rate falling, including Italy. In Germany the unemployment rate was unchanged from July.

Disparities in the labor market among core and periphery countries persist. Greece is the economy in the Eurozone with the highest unemployment rate (18.3%, data refers to June), followed by Spain (16.2%). At the other end of the spectrum, Malta (4.1%), Germany (4.4%) and the Netherlands (4.6%) have the lowest unemployment rates.

Commenting on the outlook, Bert Colijn, Eurozone senior economist at ING, stated:

“Second wave effects carry a lot of uncertainty about the growth environment though. A new round of more national lockdowns could have a serious impact on the labour market again, which is not our base case, but cannot be ruled out either. Still, as short-time work schemes have been lengthened in most large economies, and even into 2022 for France and Germany, a cliff-edge increase in unemployment has become much less of a concern for 2021.”

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