Three words, 11 million jobs: Draghi’s legacy for euro area

Bloomberg

Three words — whatever it takes — defined Mario Draghi’s time as European Central Bank president, but he’s prouder of another number: 11 million jobs.
Hardly a public appearance goes by without Draghi mentioning employment growth in the euro zone as a justification for the extraordinary monetary stimulus he’s pushed through since 2011.
The focus on jobs might be understandable given that, despite all his efforts, he’s fallen far short on his primary mandate of inflation. That failure forced him into a last-ditch, and controversial, push in September to boost price growth. He leads his last Governing Council meeting on Thursday before retiring on October 31.
So how has the region’s economy fared under Draghi, with his 2012 pledge to save the euro, and crisis-fighting measures such as negative interest rates and asset purchases?

Labor Market
Employment growth since 2013, when the 19-nation euro zone emerged from its double-dip recession, is unequivocally Draghi’s biggest economic achievement — if you discount that the single currency might not even exist without his commitment the previous year to protect it when a debt crisis sparked breakup fears.
The labour market has underpinned the bloc’s recovery, feeding private spending and investment. It has become one of the biggest bulwarks against the recent chaos from the
US-China trade war, President Donald Trump’s protectionist rhetoric against Europe, and Brexit.
Looking deeper though, the picture is more complex. Germany has built on impressive job creation that started well before Draghi’s term, after domestic reforms, and was only briefly interrupted by the Great Recession. France can tell a similar tale, but labor markets in Spain and Greece along with some of the smaller euro members still haven’t made up the lost ground.
Regional differences are equally striking when analysing economic growth. Aside from Greece and Cyprus — both deeply scarred after years of austerity and a near-collapse of their financial system — no country has done worse than Draghi’s native Italy in terms of total output per head.
The prime reason for the ECB’s record-low interest rates, cheap long-term loans and $2.9 trillion of asset purchases — so far — is its attempts to overcome weak inflation.
That hasn’t gone well. Consumer-price growth over Draghi’s eight-year term has averaged 1.2% which, unlike with his predecessors, falls short of the goal of “below, but close to, 2%.” It was even negative at times — so Draghi can at least console himself with the fact that he beat deflation.
Subdued price pressures are a mystery, and not only for Draghi. Central bankers around the world have puzzled over why low unemployment and rising wages aren’t translating into stronger inflation as standard economic models predict. The suspicion is that developments such as global supply chains and internet commerce are at least partially to blame.
The result is dwindling inflation expectations, a dangerous development for a central bank whose credibility hinges on convincing investors and the public that it can deliver on its mandate.