European Government Expansion Did Not Expand the Job Markets
For the past two years, governments in the European Union have engaged in contradictory actions by both suppressing economic growth through lockdowns and other covid-19 restrictions and simultaneously trying to “stimulate” their economies through monetary expansion by the European Central Bank. The results, not surprisingly, have fallen far short of hopes and expectations by central bankers.
The unemployment rate in the euro area fell to 7 percent in December and 6.4 percent in the European Union, compared to the rate of unemployment in the United States of 3.9 percent. However, these unemployment rates do not include furloughed jobs covered by unemployment retention schemes, which account for another five million workers waiting to return to normal activity.
After a fiscal stimulus plan of more than 5 percent of gross domestic product (GDP) in 2020 and another 4 percent in 2021 and the European Central Bank purchasing 100 percent of net issuances from most sovereign debt instruments, the recovery is very weak. Furloughed jobs are rising again, working hours are still below the prepandemic level, and real wages are falling as inflation eats into gains made during the recovery.
In December 2021, the youth unemployment rate was 14.9 percent in both the EU and the euro area. These unemployment levels are high, but some member states have even higher jobless ratios. Spain has a 13 percent official unemployment rate, with still 220,000 furloughed jobs, and the youth unemployment rate in that country is 30 percent.
Article from Mises Wire