After climbing to a peak of 8.6% in the summer of 2020, when the Eurozone was in recession due to lockdowns put in place to stem the 1st wave of the coronavirus, the unemployment rate has rapidly declined to the current historic low.
Some countries, such as Germany (unemployment rate at 2.8%), have full employment. However, half of the German companies cannot find the workers they need. There are simply no more workers looking for work. Other countries still have high unemployment, such as Spain (12.6%), but deteriorating economic prospects are prompting firms to curb recruitment.
Whether it is a lack of workers or job offers, the improvement in the labour market seems to be over in the Eurozone. The number of people looking for work increased by a symbolic 25,000 between May and June.
While high inflation is already eroding household purchasing power, the end of falling unemployment is another factor that is weakening household consumption. In June, retail sales fell 1.2% compared to the previous month. This was the second sharp decline three months after April's fall (-1.1%).
After a very dynamic first half of the year, economic activity in the euro area will slow down significantly in the coming months.
We no longer invest in eurozone equities as part of a diversified portfolio. However, some European companies are still attractive.