2m jobs have been created since early last year in the 19-nation euro zone
from the bustling arcade of Atocha railway station in central Madrid are the offices of Spotahome, a startup that matches tenants and long-term rentals. Set up five years ago, it lists 65,000 properties in 11 European cities and employs more than 300 people. An example of Spain’s small but fast-growing startup scene, its success reflects an economic resurgence in Madrid and some other European cities.
Since 2018 a slowdown in trade and manufacturing, concentrated in Germany and Italy, has cast a pall over the euro area. But matters would be far worse had other countries and sectors not held up. Spain alone accounts for a tenth of the zone’sbut in recent years has contributed a fifth of growth and an outsize share of new jobs. Across the bloc sectors that rely on domestic demand have expanded, as recovering labour and credit markets have boosted household and business spending.
Across the euro zone 2m jobs have been created since early 2018. The unemployment rate has fallen to pre-crisis levels. Wage growth, though still modest, is picking up and, courtesy of a dip in the inflation rate in the past year, real incomes are accelerating. Ms Ordonez expects them to grow by 2.5% in France this year, the fastest pace since 2007. Banking reforms in Spain mean credit is flowing more freely. Companies are investing more in equipment. Investment in housing has also risen.
The fear, however, is that as external gloom deepens, the positive loop will go into reverse. The slowdown in manufacturing, at first dismissed as temporary by economists, has persisted: the threat of American tariffs on European cars and a disorderly Brexit still loom. Trouble in exporting industries can easily spill over into domestic demand, as it did during the financial crisis, by encouraging businesses and households to save rather than spend.
In Germany, industrial weakness is starting to be felt in the labour market. Second-quarter profits at, the world’s largest chemicals firm, were down by 47% compared with a year earlier. The company plans to cut costs and jobs. According to the Ifo Institute for Economic Research in Munich, the number of manufacturers planning to introduce short-time working over the next three months is expected to reach its highest level since 2013.
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