This piece in Bloomberg today really caught my eye:
"Italy's unemployment rate dropped to a record low in the first quarter as growth in Europe's fourth- biggest economy outpaced expectations."
It caught my eye, since it has to be considered as what you could call "real spin". So what is this really spectacular growth they are talking about:
The economy grew a faster-than-expected 0.3 percent in the first quarter as consumer spending, spurred in part by better job prospects, increased at the fastest pace in almost two years.
0.3% in a quarter, that's an annual 1.2%, so if that is "faster than expected" I'd hate to see a really bad reading! And what about this "increase" in consumer spending, as I recall from this post, even Bloomberg itself wasn't clear about this until very recently:
Italian retail sales fell for a third month in May as consumer spending continued to be hampered by rising gasoline prices and tax increases.
Of course it is possible to square the two Bloomberg articles by pointing out that the data on employment - which fell to 6.2% in the first quarter according to today's data from ISTAT - is from the first quarter while the May retail sales are second quarter data, but since we are now in June it does seem a bit perverse - to say the least - to be citing earlier data as proof that things are going well when the later data seem to suggest that they aren't. That's why I call it spin.
Anyway, then we get to the bottom line:
Still, an increase in the number of people who gave up looking for work contributed to the first-quarter decline in unemployment, an Istat spokesman said. While 52,000 fewer Italians were searching for jobs in the first three months of the year on a seasonally adjusted basis, total employment dropped by 59,000, or 0.3 percent, in the quarter.
So despite the acceleration in growth, employment actually dropped during the first quarter. But if this is the case, why the fall in unemployment. Basically I think because Italy is ageing. Essentially we are seeing now a similar phenomenon in Germany (see this post) and Japan (see this post), as median ages rise, more elderly workers leave the labour force, the dependency ratio rises, and unemployment goes down.
More interestingly even as employment tightens in these countries, wages and salaries do not rise significantly. In Germany according to Eurostat Q1 y-o-y wages and salaries rose by only 0.1%, and in Japan they are falling. Curiously the Q1 data for Italy were not available in their final form when Eurostat published their data, but it will be interesting to see if they are now falling in Italy too (at least in real terms).
An English version of the ISTAT data is available here, and I have "lifted" this chart for your convenience:
(please click over image for better viewing)
as can be seen from the seasonally adjusted data employment grew (year on year) by 0.2%, while the labour force declined by 0.9% (and a massive 2.7% in the South where there are of course very few immigrants). So despite something like 300,000 new migrants in 2006, the labour force actually seems to have fallen, if this is the case I find the situation astonishing.
Edward Hugh has a lively and enjoyable Facebook community where he publishes frequent breaking news economics links and short updates. If you would like to receive these updates on a regular basis and join the debate please invite Edward as a friend by clicking the Facebook link at the top of the right sidebar.