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Labour Market Dichotomy In The Eurozone

ByThe National Bank of Canada
Published 04/03/2012, 09:09 AM
Updated 05/14/2017, 06:45 AM
OPIN
-6.82%
IMOB
0.06%

If this isn’t a recession in the eurozone, it certainly feels like it. In February, the unemployment rate reached 10.8%, the highest in fourteen years. Spain’s already mind-boggling jobless rate rose further to 23.6%. And in the three months to February, Portugal’s jobless rate has jumped a full percentage point to reach 15%, while Italy’s has risen half a percentage point to 9.3%.

Meanwhile, Germany is enjoying its lowest unemployment rate in over two decades at 5.7%. This eurozone labour market dichotomy is partly a result of extraordinary factors e.g. unlike Germany, Spain is going through a massive real estate correction which decimated its labour market. But as today’s Hot Chart shows, what gave Germany its edge is its success in controlling its labour costs relative to others. For the likes of Spain, Italy, Greece and Portugal, life inside the eurozone leaves them with just one option to achieve competitiveness i.e. a weaker real exchange rate via deflation.
World Labour market dichotomy in the eurozone

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