Wednesday, 28 Oct 2020

Subsidized furlough programs keep a lid on eurozone unemployment.

The unemployment rate in the eurozone edged up to 8.1 percent in August from 8 percent in July, the European Union said Thursday, as government support cushioned much of the economic impact of the pandemic.

But economists fear that the jobless rate could surge when the programs expire, or employers go bankrupt or are forced to lay off workers permanently.

Germany, France and many other countries compensate workers for some of the income they lose when their employers put them on furlough or reduced hours. That has a led to relatively modest increases in the jobless rate, which was 7.2 percent in March when the pandemic hit Europe.

In the United States, which does not have a comparable program, unemployment shot from 3.5 percent in February to 14.7 percent in April, though the rate has since declined to 8.4 percent.

In theory, people on Europe’s short-work programs will get their jobs back when the economy improves. But as the pandemic lingers and surges in some places, restaurants and other small businesses may go under, while companies such as airlines may lay off workers permanently because they don’t expect revenue to rebound for several years.

“Short-time work schemes have managed to flatten the curve substantially,” Bert Colijn, a senior economist at ING Bank, said in a note. But he added that surges in the number of new infections creates “a lot of uncertainty about the growth environment.”

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