Eurozone joblessness at 8-year low, but wages, inflation are still lagging
The eurozone economy is healing nicely but inflation remains weak
good news for consumers in the short run but a sign of underlying weakness in wages and companies’ pricing power.
That’s the take-away from economic reports released Monday that showed while the unemployment rate in the 19-country currency union fell to its lowest in eight years, price increases are modest.
The number of people in work rose by 148,000 in June, the Eurostat statistics agency said Monday, bringing the unemployment rate to 9.1 percent, from 9.2 percent in May. That echoes reports in recent weeks of rising business activity and confidence across all eurozone countries — even those, like Greece, that have been hit hardest by financial troubles.
Such improvements have emboldened the European Central Bank to consider when it might signal a phasing out of its bond-buying stimulus program, under which it pumps 60 billion euros ($70 billion) a month into the economy. ECB President Mario Draghi has said it would likely consider such a move in the fall.
But the missing piece in the eurozone’s recovery is a significant rise in inflation, which the ECB is tasked with getting to just under 2 percent. While weak inflation can be good for shoppers, it points to fragilities in the economy: wages are not rising quickly enough to spur spending or companies may not be confident enough in consumers to raise their prices.
In July, the annual inflation rate was stuck at 1.3 percent. And what gains there were, were mostly due to energy price increases of 2.2 percent. Excluding volatile items like energy, food, alcohol and tobacco, prices were up a still-modest 1.2 percent.
Economists say inflation is unlikely to rise substantially as long as there remains slack in the labor market.
“While June’s unemployment data paint a positive picture of the eurozone labor market, July’s (inflation) release confirms that this strength has yet to generate inflationary pressure,” said Jennifer McKeown, chief European economist at Capital Economics in London.
NHTSA said it’s “deeply concerned” that some automakers have low completion rates. In a 2015 order, NHTSA threatened fines against automakers who don’t comply with deadlines. Asked if fines are possible, an agency spokeswoman said it is monitoring compliance “and will take further action as appropriate.”
Automakers say completion rates are improving and they’re cooperating with the government. Some say they’ve had trouble getting parts, and most have had difficulty finding owners and persuading them to get cars repaired.
Subaru, Mitsubishi and Nissan did not respond to requests for comment.
Critics such as Nelson say NHTSA is rudderless under the Trump administration. Since President Donald Trump took office, the agency has been without an administrator and two top deputies. But the recalls were moving slowly before Trump took office, records show.
Ford’s slow response in the January 2016 recall of driver-side inflators in Ford Ranger pickups means thousands of trucks with dangerous inflators are still being driven. A South Carolina man was killed by an inflator in December of 2015 when his Ranger crashed. Only 511 of the nearly 362,000 recalled Rangers from the 2004 through 2006 model years have been fixed, with another 3,500 owners unreachable or vehicles removed from use, according to Ford’s latest report. Ford had two other recalls from 2015 with completion rates under 40 percent.
Spokeswoman Elizabeth Weigandt says Ford has been replacing Ranger inflators in high-risk areas with newer versions of the same inflators that are in the vehicles now, with the intent of swapping them for safer ones later, she said. Since the inflators deteriorate over time, newer ones are better. “We are working with our suppliers to expedite final remedy parts for these vehicles and expect those to be available in early fourth quarter 2017,” she said, declining further comment.
Quarterly reports filed by BMW, Fiat Chrysler, Daimler Vans, Nissan, Mazda and Mitsubishi all showed completion rates under 50 percent. Daimler hit only 8.4 percent and BMW reached 28.6 percent. Fiat Chrysler’s lone recall came in at 48 percent, while one Toyota recall was above 50 percent and another just below. Subaru hit 57 percent. Due to a parts supplier problem, BMW got a five-month deadline extension.
Most of the reports are as of March 31, the latest available. Fiat Chrysler and Subaru figures are from the second quarter, while the latest available Nissan and Mitsubishi reports were from last year’s third quarter. At that time, Mitsubishi was at 31 percent, while Nissan reached just 25.6 percent.
Even Honda, which has replaced over 63 percent of the inflators in its two “Priority One” recalls, has 3.3 million inflators left to fix.
In a letter to senators, NHTSA Acting Deputy Administrator Jack Danielson wrote that automakers have had enough time to get replacement parts.
Several vehicle owners say dealers are still turning them away for lack of parts. John Carroll of Bel Air, Maryland, near Baltimore, said he checks with his dealer often to see if an inflator has arrived for his 2010 Mercedes ML350 driver’s air bag.
“The answer is always the same. They don’t have the parts yet,” Carroll said.
To get over 60 percent, Honda set up teams in major metro areas who visit owners’ homes. In some cases, Honda will send technicians to fix cars in driveways. The company also has used letters, social media and telephone calls to reach owners, spokesman Chris Martin said.
NHTSA has urged automakers to take steps similar to Honda, and it has hired a monitor to watch the automakers.
John Carroll of Bel Air, Maryland, next to his 2010 Mercedes ML350, says his dealer keeps turning him away to replace a recalled driver’s side Takata air bag inflator because parts have not arrived.