In March, the employment component of the purchasing managers indices for the eurozone declined, whereas in the US, initial jobless claims skyrocketed. Companies need flexibility to manage their cost base but households suffering from an unemployment-related income loss would act as a headwind to the recovery. In the US, the Federal government will top up unemployment benefits, which vary from state to state. In Europe, short-time work schemes allow employers to adapt their workforce without having recourse to costly lay-offs.
Looking at the economic data for the euro area that has emerged recently, the conclusion is clear: we are seeing an unprecedented economic contraction in the service sector. The average eurozone service sector PMI plummeted in Q1 2020, well below its long-term average...
