Report
Patrick Artus

What accounts for the unemployment rate "miracle" in the United States compared with the rate in the euro zone?

The unemployment rate fell to 3.6 % in April 2019 in the United States versus 7.7 % in the euro zone in March 2019 (hence Donald Trump’s tweet, "jobs, jobs, jobs!"). What accounts for the unemployment rate "miracle" in the United States compared with the euro zone? We must first verify whether it is the performance in terms of jobs that explains the unemployment gap, and not only changes in the labour force. When comparing the participation rates and the employment rates (calculated in the same way) in the United States and the euro zone, we see that the low participation rate in the United States explains a significant part of the low level of the unemployment rate compared with the euro zone; We then have to determine what accounts for the greater job creation in the United States, which also plays a role in explaining the low unemployment: Labour force skills? No; Demand -stimulating policies, even at full employment? Yes, probably ; Low unskilled labour costs and creation of unsophisticated jobs in services? Yes; Or, on the contrary, jobs in industry and energy? No. All things considered, the very low unemployment rate in the United States compared with the euro zone is primarily explained by the low level of the participation rate and the low cost of unskilled labour. Does the euro zone want to copy this model?
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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