For several years now, the unemployment rate in the euro zone has actually been heading in only one direction: it is going downhill almost unchecked – in a positive sense. If the trend continues, the pre-crisis level of 7.3 percent from March 2008 should be reached in two to three months. However, an end to the recovery phase seems to be gradually approaching. The indicator we have calculated for the unemployment rate in the euro zone has been pointing for months to a noticeable slowdown in the downward trend, which should increasingly visibly turn into bottoming out.
The number of euro countries in which the recovery in the labour market is intact still predominates. However, a number of countries have already achieved very low unemployment rates in the past two years. Here, historic lows have already been reached or there is virtually full employment. A further contribution to reducing the unemployment rate can hardly be expected from these countries. A slowdown in the recovery of the labour market is also in line with our general economic picture. On the one hand, we assume that the smouldering US-China trade conflict has already caused economic damage in the euro zone and continues to put the economy in uncertainty. On the other hand, after several years of an economic upswing in the euro zone, we expect the current economic cycle to gradually come to an end. The labour market will usually react to the economic slowdown with a delay of a few quarters.
However, an abrupt end to the upswing on the EMU labour market is not to be expected. There is still a high shortage of skilled workers throughout the euro area. However, the decline in the unemployment rate should slow down increasingly in the coming months. Taking into account the results of the indicator for the unemployment rate in the euro zone, a low point is likely to emerge in the course of the first half of 2020. The annual average for the coming year is then expected to fall only slightly to 7.2 percent, after 7.5 percent expected in 2019.