Macro roundup: Unemployment falls

Good news as labour market shows resilience in July

The steep fall in Greece’s unemployment rate in July is one of the most encouraging data points to emerge from the economy recently.

A drop of 1.2 percentage points in July to 16.8 percent, around the same level that the jobless rate was at last autumn, could be a cause for optimism that the coronavirus shock might not knock the economy too far off its course in the medium term — though we’d need to see more evidence before we could start heralding “green shoots”.

The data needs to be interpreted with caution since the idiosyncratic nature of the economic shock — with workers placed on furlough schemes or unable to seek jobs during lockdown — has led to an unusual number of unemployed people misclassified as employed or inactive. The large movements also have an effect on seasonal adjustment, which use trends that need several months of data to emerge, leading to substantial revisions from month to month.

With those caveats in place, the data still suggests a peak may have passed. Last month, I used a heuristic to derive a “shadow” rate of unemployment by adding 80 percent of the increase in inactive workers over the corresponding month of 2019 to the unemployed total. Revised data this month suggests a substantial narrowing in June of the gap between the headline rate and this shadow rate, which is now in a second month of decline.

This data indicates that the recovery is well underway from the first wave of the pandemic and the lockdown in spring, which saw gross domestic product shrink 14 percent in the second quarter compared with the first. Danger remains from the persistence of the virus, which is now in resurgence.

Other data

  • Deflation showed some sign of stabilising in September, with the EU-harmonised consumer price index dropping 2.3 percent, the same rate as August.

  • Industrial production fell an annual 3.8 percent in August, with manufacturing falling 0.7 percent. Electricity supply dropped 14.1 percent.

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Next week’s key data

  • July building activity survey (Elstat)

  • 2019 annual national accounts (Elstat)

  • August data on business revenue (Elstat)

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