Job vacancy data reveal better prospects for Britain, stagnation in Eurozone

Job Vacancy Rates by country for the second quarter of 2013. Source: Eurostat graph.

Job vacancy statistics is not a widely used analytical tool despite the fact that is follows more accurately a number of vital social and economic variables, like the robustness of growth or the steepness of fall of economic activity. They are also indicative of the structural effectiveness of labour market workings, of the efficacy of labour market services and also depict better the availability and the strength of connections between labour demand and supply. That’s why Eurostat, the EU statistical service, regularly publishes data on job vacancy rates (JVRs).

According to Eurostat’s definition the job vacancy rate, in part, reflects the unmet demand for labour, as well as potential mismatches between the skills and availability of those who are unemployed and those sought by employers. The JVR is calculated as the percentage of vacant job posts compared with the total number of occupied and unoccupied posts, that is total employment plus the vacant job posts.

Britain and Portugal

Predictably countries in a growth path should show a higher JVR than those in stagnation or recession. However the JVR shows much more than that. For example during the second quarter of this year Britain had a much lower quarter to quarter growth rate than Portugal, 0.7% and 1.1% respectively. Yet Britain during the same period showed a quite strong JVR at 1.9% in comparison to only 0.4% for the small south west European country. This is a strong indication that Britain will grow in the immediate future with a higher rate than it used to, while Portugal may lose its pace.

In the graph published here Eurostat releases the JVR readings for a number of European countries for which there are available data. Malta, Belgium, Germany and Britain are among the EU countries having recorded the higher JVR readings during the second quarter of 2013, while Greece, Poland and Portugal had the lowest. The higher reading however was observed outside the EU, in Norway with 2.9% as in Malta. These results were predictable given the particular economic conjuncture in any of those countries, with the only exception the rate for Britain. In this case the high JVR attainment for the UK in Q2 despite its presently low growth rate is an early indication that the tempo of its GDP increase will strengthen in the immediate future.

EU and Eurozone

According to Eurostat during the second quarter of this year the estimated job vacancy rate (JVR) “was 1.5 % for both the euro area (EA-17) and the EU-28. Compared to the previous quarter the JVR was stable in Eurozone and increased by 0.1 percentage point (p.p.) in the EU-28”. It must be reminded here that Eurozone in the second quarter of 2013 marked its first positive growth rate with a weak 0.3% GDP increase, after three consecutive years of recession. The fact however that Eurozone’s JVR appeared stagnant during the same period is not a good omen for the immediate future.

In detail now among the countries for which Eurostat has available data for the second quarter of 2013, the “JVR rose in six and fell in 12 countries, when compared with the same quarter of the previous year. Increases were registered for the United Kingdom (0.2 p.p.), Denmark, Ireland, Latvia, Hungary and Romania (all 0.1 p.p.). The JVR remained stable in Belgium, France, Italy, Lithuania, Portugal, Slovakia, Norway and Switzerland. Finally, the JVR fell in Malta (-0.4 p.p.), the Netherlands (-0.3 p.p.), Germany, Austria and Sweden (all -0.2 p.p.), Bulgaria, the Czech Republic, Estonia, Croatia, Cyprus, Luxembourg and Poland (all -0.1 p.p.)”.

Again the UK marked the highest increase in quarter to quarter JVR change, a development supporting even more clearly the view that Britain is at the threshold of a new growth period. JVR is the only variable that shows so clearly the good growth prospects of this country for the immediate future. On the contrary Eurozone’s JVR stagnation is a negative indication. These developments show also the unquestionable value of the JVR indicators.