With the latest unemployment figures from Eurostat, for November 2017, the Euro Area has passed a milestone: for the first time the unemployment rate, at 8.7%, is below the average of the “normal times” prior to the economic crisis. This provides a good occasion to evaluate the current state of the labour market, as far as unemployment rates are concerned, in the Euro Area and its member states. To what extent have the scars of the crisis healed? Where do the most serious challenges remain?
Figure 1 shows the labour market recovery from the double whammy of the global financial and then the Euro crisis: it begins in the spring of 2013, in the wake of the belated “whatever it takes” announcement by the European Central Bank. Unemployment fell from its peak of 12.1% and by January 2017 it was below its average for the entire history of the common currency to date (9.6%). By November the continued improvement had brought the figure down below the average recorded up to the crisis (8.8%). Over the last 12 months the unemployment rate has fallen at an average of almost 0.1 percentage point – around 130 000 persons – a month.
Fig. 1 Euro Area unemployment rate, Jan 1999-Nov2017
At 8.7% the most recent figure is 3.4 percentage points below its peak (12.1%) and 1.4 points off its pre-crisis low of 7.3%. If reattaining that pre-crisis level is taken to be the – initial – goal, then the Euro Area has gone a fraction over 70% of the way.
Of course these averages conceal very substantial variation between Member State experiences, in a number of dimensions. Figure 2 shows for the €A19 and for each country the latest unemployment rate (the horizontal bars) and the highest and lowest rates since the start of the common currency, which are indicated by, respectively, the top and the bottom of the vertical lines.
Fig. 2 Maximum, minimum and latest unemployment rates
Most obviously there is a huge gap in terms of the current rates between countries such as Germany, Malta and the Netherlands where unemployment is as low as 3.6%, Italy and Cyprus where it is in double-digits (11% each) and, especially, Spain and Greece at 16.7 and 20.5% respectively.
The gaps between the peak and trough in the unemployment rate have been rather limited in Austria (just 2.6 percentage points), Belgium, France and Finland, whereas they have been quite massive in Greece (more than 20 pp), Spain, the Baltics, followed by Cyprus, Portugal and Slovakia. It is noteworthy that in Germany the peak to trough gap – at 7.6 points – is very substantially above the Euro Area average (4.8 points). It is also one of just a small number of countries (Malta, Slovakia) in which the current value is the lowest recorded, rather than in early 2008.
The biggest reductions in unemployment rates – comparing the peak to the current rate – have been achieved in the three Baltic States and Slovakia, followed by Ireland, Spain, Portugal (all close to 10%) and Greece. This has not all be achieved by job growth; emigration played an important role in some countries, especially in the Baltics.
Earlier it was noted that the Euro Area as a whole has retraced about 70% of the distance from the peak to the month with the best labour market performance. If we apply the same rough metric to individual countries, we see that, of the high unemployment countries, Spain has come about half-way, Greece one third. Of particular concern is the only slow fall in employment in Italy and France. Italy has knocked 2 percentage points of its peak tally, but from the very high rate of 13% and this is less than a quarter of the way to the level it had achieved prior to the crisis. Meanwhile France has managed just a reduction of just 1.6 percentage points, albeit from the somewhat lower peak of 10.8%.
Fig. 3 Two measures of dispersion of unemployment rates in Euro Area
The tendency for unemployment rates to fall faster during the recovery in countries in which rates had been pushed up the most by the crisis has led to some convergence between countries. The gap between the best (Germany) and worst (Greece) performer is still very substantial, though, at 16.8 percentage points (September 2017). It was about the same in the early 2000s before a convergence process set in; in early 2008 the gap had been just 6.6 points. In the depths of the labour market crisis, however, the gap widened to a phenomenal 22.8 percentage points. Broadly the same pattern is shown by a measure (the coefficient of variation, on the right-hand scale) of the overall degree of divergence between all 19 countries (Figure 3).
Overall, the Euro Area labour market as a whole – at least as measured by the unemployment rate – is no longer in acute crisis; the unemployment rate has fallen below the pre-crisis average as the extraordinary monetary policy measures and subsequently the easing of austerity steadily worked their way through to output and then the jobs market. More than two thirds of the path back to pre-crisis low-point of unemployment – taking that as a first target – has been achieved. Some countries have achieved very remarkable reduction in unemployment, from very high levels.
Huge variation remains between countries, with unacceptably high rates still prevailing, especially in Greece and Spain. Arguably more worrying for the future of the common currency, however, are the still high rates in Italy and France, large countries in which unemployment rates have fallen but slowly. Together these two countries now account for almost 40% of the total number of persons unemployed in the Euro Area.
 The analysis is based on harmonized monthly unemployment rate data provided by Eurostat and based on the Labour Force Survey. To ensure comparability the “Euro Area” figures refer to all the current 19 members. Data are available for all 19 countries from January 1999 to November 2017. (Exceptions: data for 1999 not available for Estonia, Cyprus and Malta; the most recent value for Estonia is for October, for Greece September.) The total period average refers to all the months for which data are available. The pre-crisis average refers to 1999-2007 inclusive. The recent pace of improvement or reduction is calculated as the difference between the latest monthly value and that 12 months earlier divided by 12.
 As noted the most recent figure for Greece is for September. In the previous 12 months the unemployment rate in Greece had fallen rather fast, at an average of 0.23 percentage points a month, so that the comparable (November) figure for that country is probably around 20%.