Unemployment in Europe has dropped below the level it was at before the pandemic, but it doesn’t look like wages will rise this year, even tho the cost of living has gone up.

In October, the unemployment rate in the eurozone was 7.3%, which is below pre-pandemic levels. In September 2020, it was 8.6%. It’s mostly because of furlough programs, which paid businesses to keep workers on as employees during the pandemic by covering a lot of their wages. Economists say this is why the swings are so small.

At their peak, these programs helped tens of millions of workers across the currency area. They have since shrunk a lot.

Economists look at the number of hours worked instead of the number of jobs because so many people are still working but aren’t doing as much as they used to. This way, they can figure out how much slack there is in the eurozone’s jobs market.

There were still less hours worked by eurozone workers in the three months from July to September than there were in the last three months of 2019. For many economists, that means businesses should be able to raise output without having to pay workers a lot more to get them.

If wages rise quickly, there is more room for people to work, which makes it more difficult for them to do so. This is what Sven Jari Stehn, the chief European economist at Goldman Sachs, said.

There have been a lot more COVID-19 infections in the EU since the end of the third quarter, thanks to the Delta and Omicron strains. That has led to new restrictions on what people can do, which has made the job market more flexible. Some people have been forced back into furlough programs because of this. As of November, there were 608,000 furloughed workers in Germany, which is an increase from 598,000 in October, but still a small fraction of the six million who will be furloughed at its peak in April 2020.

So far, wage increases have been very slow, even tho the unemployment rate has dropped and there have been more job openings. European Union statistics show that hourly wages in the eurozone rose 2.5% in the three months from July to September than they did a year ago.

Average U.S. hourly wages rose by 4.5 percent over the 12 months from July to September. That may be because European furlough programs may have made a difference.

In Europe, there hasn’t been as much of a scramble for workers as there has been in the U.S., and there hasn’t been as much of an opportunity for workers to get paid more.

People in Europe appear to have lost more jobs than people in the United States. In June 2021, 61.6 percent of people were working or looking for work, down 1.7 percentage points from December 2019. During the second quarter of 2021, 64.3 percent of people in the eurozone were in the labor force. This was down just 0.6 percentage points from the last quarter of 2019.

If you look at the European job market now, it’s a little more flexible than it was at the end of 2019. But inflation has been much higher than the European Central Bank’s goal of about 2% for the last few months.

However, so far, the European Central Bank hasn’t seen any signs of what it calls “second-round effects,” which it says are workers demanding higher wages to make up for lost real spending power. This would then lead to more price rises as businesses move to pay more for labor.

That is one reason why the central bank plans to keep buying bonds into 2022 and has signaled that it doesn’t expect to raise its main interest rate this year. The Federal Reserve, on the other hand, plans to end its bond purchases by March and has penciled in three quarter-point rate rises in 2022.

Christine Lagarde, the head of the European Central Bank, told reporters last month that the numbers weren’t telling us that we were seeing second-round effects. She said wage negotiations had delivered or were about to deliver numbers that would actually have second-round effects.

If inflation stays above its target for a long time, workers are more likely to ask for big pay raises to keep their spending power the same. As of mid-December, the ECB said that the inflation rate would likely be 3.2% in 2022, up from its September forecast of 1.7%.

Labor unions want bigger wage increases than what were seen in the third quarter, especially if businesses had made a lot of money during the pandemic, or if workers had become much more productive.

Many workers played a big role in keeping our society running during the pandemic, so they should be paid more. Esther Lynch, the deputy general secretary of the Europe Trade Union Confederation, says that this is also important to remember. “This should not only be applauded, but it should also be paid for.”

As a result, the labor unions don’t seem very interested in raising wages across the board. They’ve been more concerned with keeping jobs in the face of low-wage competition from Eastern Europe and Asia over the last few decades.

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