Even as a new Covid-19 wave is washing over the European continent, the EU economy has been delivering a stream of uplifting data. When the September figures recently came out, they showed that eurozone unemployment had fallen back to pre-pandemic levels. Employment numbers for the third quarter, out this week, prove that this is not because many Europeans have given up looking for work altogether: total EU employment returned to its end-2019 level, and the eurozone was only just below the pre-pandemic record.
On top of this good news, the EU and the eurozone recorded a second quarter of above-2 per cent quarterly growth in economic output, or more than 8 per cent on an annualised basis.
This experience on both growth and jobs is better than anyone could have hoped for. It could not be further from Europe’s lamentable record after the global financial crisis. Back then, growth fizzled and went into reverse for a second recession. The eurozone debt crisis left much of the bloc with a lost decade of low growth and high unemployment.
This month’s benign figures, then, prove that the EU can learn. The policy responses were everything the previous round was not: decisive, swift, and of sufficient scale. Monetary policymakers left little doubt they would stabilise markets and loosen financial conditions. Fiscal policy broke new ground with a pan-EU recovery fund, in addition to suspending the fiscal straitjacket of the bloc’s normal rules for national budgets.
In addition, the EU can with some confidence say its social model has stood it in good stead. Its labour market systems were well set up for furlough schemes to support workers and businesses through enforced lockdowns. Where the UK and the US had to scramble to get assistance to those needing it, many European countries could rely more on scaling up existing schemes.
While the UK has managed its quickly-patched-together furlough scheme well, its third-quarter employment rate was still 1.1 percentage points lower than before the pandemic. The US, which chose to let unemployment soar and pay enhanced benefits to jobless workers rather than subsidise furloughed employment, still has more than 4m fewer people employed today than in February 2020 (almost 3 per cent of pre-pandemic employment).
The danger for the EU is that success could breed complacency. The contrast with the US may look flattering today. But both economies face significant restructuring. Europe’s success in protecting employment relationships could yet turn out to be a hindrance in shifting workers to the jobs needed once the pandemic is truly in the past.
For now, the pandemic is still very much with us. The past 18 months have shown that jobs and growth in Europe ebb and flow with the pandemic waves. All the positive indicators could soon be pointing down again.
What is more, aggregate pan-European data obscure sometimes surprising differences between national economies. Some still lag their pre-pandemic employment. While many expected this from countries such as Spain and Italy, with their large tourism sectors and already challenged public finances, fewer may realise that German employment has been lagging too. Portugal, in contrast, exceeded its pre-pandemic employment already in the second quarter.
All this means EU policymakers cannot take their eyes off the ball. Their deserved satisfaction with what has been achieved should motivate them to keep successful policies active wherever and for as long as necessary.
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Even as a new Covid-19 wave is washing over the European continent, the EU economy has been delivering a stream of uplifting data. When the September figures recently came out, they showed that eurozone unemployment had fallen back to pre-pandemic levels. Employment numbers for the third quarter, out this week, prove that this is not because many Europeans have given up looking for work altogether: total EU employment returned to its end-2019 level, and the eurozone was only just below the pre-pandemic record.
On top of this good news, the EU and the eurozone recorded a second quarter of above-2 per cent quarterly growth in economic output, or more than 8 per cent on an annualised basis.
This experience on both growth and jobs is better than anyone could have hoped for. It could not be further from Europe’s lamentable record after the global financial crisis. Back then, growth fizzled and went into reverse for a second recession. The eurozone debt crisis left much of the bloc with a lost decade of low growth and high unemployment.
This month’s benign figures, then, prove that the EU can learn. The policy responses were everything the previous round was not: decisive, swift, and of sufficient scale. Monetary policymakers left little doubt they would stabilise markets and loosen financial conditions. Fiscal policy broke new ground with a pan-EU recovery fund, in addition to suspending the fiscal straitjacket of the bloc’s normal rules for national budgets.
In addition, the EU can with some confidence say its social model has stood it in good stead. Its labour market systems were well set up for furlough schemes to support workers and businesses through enforced lockdowns. Where the UK and the US had to scramble to get assistance to those needing it, many European countries could rely more on scaling up existing schemes.
While the UK has managed its quickly-patched-together furlough scheme well, its third-quarter employment rate was still 1.1 percentage points lower than before the pandemic. The US, which chose to let unemployment soar and pay enhanced benefits to jobless workers rather than subsidise furloughed employment, still has more than 4m fewer people employed today than in February 2020 (almost 3 per cent of pre-pandemic employment).
The danger for the EU is that success could breed complacency. The contrast with the US may look flattering today. But both economies face significant restructuring. Europe’s success in protecting employment relationships could yet turn out to be a hindrance in shifting workers to the jobs needed once the pandemic is truly in the past.
For now, the pandemic is still very much with us. The past 18 months have shown that jobs and growth in Europe ebb and flow with the pandemic waves. All the positive indicators could soon be pointing down again.
What is more, aggregate pan-European data obscure sometimes surprising differences between national economies. Some still lag their pre-pandemic employment. While many expected this from countries such as Spain and Italy, with their large tourism sectors and already challenged public finances, fewer may realise that German employment has been lagging too. Portugal, in contrast, exceeded its pre-pandemic employment already in the second quarter.
All this means EU policymakers cannot take their eyes off the ball. Their deserved satisfaction with what has been achieved should motivate them to keep successful policies active wherever and for as long as necessary.