Euro zone labor recovery remains as fragmented as ever

Euro Zone, as well as, the European Union is facing one of the most diverse economic and Labour market recoveries in the history. Partial reforms pursued by governments coupled with the ultra-easy monetary policy from European Central Bank (ECB) has led to the rise in employment across Euro Zone, however, any level that can be called as normal still remains far off.

As of now, inflation is low with thanks to lower oil price, however if inflation do return before fragmentation is removed ECB would face critical policy choices, whether to raise rates to prevent any overheating of stronger economies with lower unemployment rate or to keep easing to bolster growth across the weaker ones like Greece, Spain, Cyprus.

European Central Banks (ECB) and the governments need to coordinate together to pursue reforms in such a way that economic recoveries converge and fragmentation gets reduced.

As of latest employment report fragmentation still high, despite improvement in the overall labour market –

• Euro area unemployment rate is at 10.1 percent in August, which is five-year low. However, a lot is still to be done as more than 15 million still remains unemployed in Euro area.

• Fragmentation is quite large. While Germany enjoys lowest unemployment rate in the region at 4.2 percent, Greece and Spain have their rates at 23.4 percent and at 19.5 percent.

• Even in France, every one in ten is unemployed.

• Euro area’s third largest economy, Italy is suffering unemployment as high as 11.4 percent.

In recent days, ECB has been struggling with its monetary policies; record easing and negative rates, still not pushing inflation higher. It’s time the governments do step in.