The state of the monetary union

By Thomas Philippon

Thomas Philippon

Keep cool and continue building the banking union.

Unemployment in the US vs the Eurozone

I first compare labour market dynamics inside the Eurozone with those inside the US (for a broader discussion of macro-financial stability, see Lane 2015). The US is a well-functioning currency area, but there is significant heterogeneity in credit and house price dynamics. This makes the US a relevant control group, as argued in Martin and Philippon (2014).

The unemployment rate is the most widely discussed statistic, but if we want to think about inefficiencies in the labour market it is more relevant to look at the rate of employment, the number of people working divided by the population that could be working. Figure 1 shows the employment rates of all individuals aged 15 to 64 in the US, the Eurozone, and France. Availability is limited for the Eurozone data and France provides a useful benchmark since it is always close to the median of the Eurozone.

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Thomas Philippon is a Professor of Finance.