Eurozone unemployment rate up in September
Yesterday Eurostat released the September unemployment rate figures for the European Union and the Eurozone. From the release:
The euro area1 (EA16) seasonally-adjusted2 unemployment rate3 was 10.1% in September 2010, compared with [downward revised] 10.0% in August4. It was 9.8% in September 2009. The EU27 unemployment rate was 9.6% in September 2010, unchanged compared with August4. It was 9.3% in September 2009.
The Eurozone unemployment rate has been above the EU (27) unemployment rate by an average 0.45% since the outset of 2007.
Across the Eurozone 16 countries, just 5 have seen their unemployment rates fall since October 2009 (I use the teilm020 table at Eurostat, which limits the time series to this time frame). Note that the unemployment rate in Italy rose over the month (8.1% to 8.3%), so unemployment rate is now unchanged since last year.
In the third quarter (the 3-month average ending in September 2010), the unemployment rate fell across 57% of the sample listed below (a highlight of the EU (27) countries plus Japan and the US) compared to the previous quarter. This is good, but the improvement is sluggish.
To me the amazing thing is that Eurozone heads of government seem to agree that 10% unemployment is a minor problem compared to the risk that countries’ public sectors might have deficits in the future. They have just decided to strengthen sanctions in the pact for stability and non-growth.
In contrast in the USA people are outraged by similar unemployment levels. A majority of likely voters plan to vote for the party which is to blame, but at least they’ve noticed that there is a problem.
Why is Europe so different ?
I think partly the more generous unemployment systems in many countries (not all it is pretty stingy in Italy) reduce the suffering from unemployment. Partly the true unemployment rate is lower than the reported unemployment rate, since high payroll taxes and strict labor laws cause high levels of underground employment. Partly the problem is the Eurozone is really different countries which co-ordinate a little and basically run by France and Germany. Spain is weak, so Spanish unemployment isn’t a crisis which must be addressed.
Mostly, I fear, people can get used to anything and unemployment around 10% feels normal over here. That would mean that it could be perceived as normal also in the USA. No matter how unreasonable (and based on ignorance of basic facts) the US response to unemployment over 9% is, at least we consider it unacceptable.
Robert Waldman: “Mostly, I fear, people can get used to anything and unemployment around 10% feels normal over here. That would mean that it could be perceived as normal also in the USA.”
It could, especially since some people have been preaching that the U. S. populace must accept a lower standard of living — despite increasing prosperity, on average. Persistent high unemployment is one way for people to accept such a lower standard. Who knows how close we will return to a Dickensian society?
I meant to say that the “accept a lower standard of living” rhetoric has been going on for a long time.
Italy and Spain offer an interesting opportunity for a comparison. They are roughly the same size, and similar in cultural and historical aspects. The historical aspects being very important because legacy wealth makes comparisons between emerging nations, which in most cases were made poorer by colonialism, and nations that were made richer by colonialism, very difficult to compare equitably.
Spain’s unemployment rate is a little more than double that of Italy’s. But… Spain’s debt to GDP ratio is conversely a little less than half that of Italy’s (55% — 115%). So, it might seem that a case could be made for the validity of Keynesian counter-cyclical fiscal policy. But of course Keynesian’s make assumptions on future productivity. And increased productivity means more mechinazation/automation etc. Increased productivity increasingly comes in conflict with job creation because competition demands efficiency. This is one of the paradoxes of our era. If there are any significant efforts underway to solve this problem, I am unaware of there existence.
If the governments of the G-5 nations have made in any efforts regarding a paradox, it has been an effort to obscure the magnitude of the issues by an effort to minimize the effects of the Paradox of Thrift. To make the circumstances even more opaque the stimulus funds in the US have artificially supported ‘skilled workers’ more than ‘unskilled workers’. ARRA for instance has kept state and local government jobs disproportionately protected, while TARP funds and ZIRP/QE and the rest has insulated the financial services sector. What this has done is to create the misleading impression that demand for skilled labor is well beyond that of unskilled labor.
So, in the US at least, the only attempted solution to the paradox of productivity is to rely on higher levels of education. Which could possibly solve the problem of creating self-supporting jobs and opportunities but… only if combined with an effort to develop a much larger consumer base (global AD constraints). The one hopeful aspect involved here is that there is ‘no shortage’ of people on this planet who have genuine needs. But of course the G-5 populations will most likely need to realize that capital allocations must be redirected toward development loans before any progress along these lines is possible. So it isn’t such that these populations don’t actually and desperately need to be educated, although differently, but it is unlikely that education as it exists today will be of any benefit. We could, for example, start to [re]educate by making sure that every G-5 citizen understands the old parable about the monkey with its hand stuck in the jar. Some well placed posters should do the trick, (college campuses and nearby bars and clubs, Wall St.[big posters with lots of monkeys and copious jars], government facilities [put posters near water coolers], and etc.).
The comparison between Italy and Spain could though answer the question of whether or not counter-cyclical stimulus is of any benefit in circumstances that include demand constraints. The ‘other’ paradox of our era may however make any such comparison difficult to analyze. If the dollar continues to depreciate this could cause yet another paradox that could be so destabilizing that it will overshadow all other economic issues. A depreciating dollar will diminish global purchasing-power and of course the dollar is the global currency. So there is a likely possibility that global AD will suffer to an extent that nations like Spain and Italy, which are in dire straits already, will have outcomes that will not compare well to other historical periods. But of course an interesting comparison between the two, in the context of how they fare under […]
Robert,
I disagree with your notion that Americans are “outraged” by 10% unemployment. Many Americans may of course say they are deeply concerned etc. but about half of the population is benefitting from low labor-costs and that half of the population has all of the influence so long as the working-class remains divided by issues other than economic considerations. And of course high unemployment keeps labor costs in check. What is lost regarding safety-net costs is offset by these low labor-costs and the US is trying to be more competitive in the global markets. If the investment-class wanted less unemployment it is doable for far less than what has been paid back in TARP funds if the savings on safety-net costs are subtracted out. The Dems would of course prefer lower UE rates for political reasons but the economy takes precedence. 10% UE is not that big of a deal when a global collapse hangs in the balance.