The Pandemic’s effect on European Markets and Employment Rates
A resurgence in Covid-19 cases across Europe and another wave of lockdown restrictions have once again displayed the pandemic’s effect on markets and employment rates.
On October 14th, French president Emmanuel Macron declared a public health emergency and imposed a 9pm to 6am curfew on Paris. German chancellor Angela Merkel limited private gatherings to 10 people from two households. In London, households are banned from mixing in any indoor setting.
The announcements of London restrictions and Paris curfews, Europe’s two richest cities, was what primarily drove the Stoxx 600 to its first weekly loss in three and drove the euro to its lowest so far this month.
Although European stocks were brought down on signs that the spread of Covid-19 is gathering momentum, these fears only seem to be temporary setbacks on the market. European stocks have risen today as strong earnings announcements from Dutch firm Philips and Swiss wealth manager Julius Baer overlooked concerns about recent pandemic restrictions.
Unemployment rates have steadily continued to rise with little reprieve from government efforts. Airline companies and the automobile sector in particular have made some of the biggest job cuts in recent months.
According to Eurostat, the euro area seasonally-adjusted unemployment rate was 7.9% in July, up from 7.7% in June 2020. The number of unemployed people in the EU increased by 336,000 in July. This compares to a rise in the number of unemployed of 281,000 in June, 253,000 in May and 397,000 in April.
Although governments have made efforts to protect jobs, these measures such as the furlough scheme are being wound down. Employers are having to pay a larger proportion of the costs of their employees and the UK’s scheme will draw to a close at the end of October.
Scenarios published by the UK’s Office for Budget Responsibility give a view of what might happen to unemployment rates. Optimistically, the unemployment rate peaks at 9.7% this year and will return to pre-pandemic levels in 2022. In its least optimistic scenario, it peaks at 13.2% in 2021 - with four million people unemployed.
