Euro unemployment remains high

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by Chris Becker

Last night saw the release of monthly unemployment statistics for the EU, and specifically Germany and Italy alongside the monthly CPI print. Although there has been almost no monthly change the readings are still way too high (even for the Germans):

  • German unemployment (September) at 6.7% (no change on last month)
  • Italian unemployment (August) at 12.3% (down from 12.6% last month)
  • Eurozone unemployment (August) at 11.5% (no change on last month)

No surprise and no change because there still remains no effective action on solving the structural unemployment situation across Europe.

Here are some more findings from Eurostat:

Compared with July 2014, the number of persons unemployed decreased by 134 000 in the EU-28 and by 137 000 in the euro area. Compared with August 2013, unemployment fell by 1 745 000 in the EU-28 and by 834 000 in the euro area.

The euro area seasonally-adjusted unemployment rate was 11.5 % in August 2014, stable compared with July 2014 but down from 12.0 % in August 2013. The EU-28 unemployment rate was 10.1 % in August 2014, the lowest value since February 2012. The rate was down from 10.2 % in July 2014, and from 10.8 % in August 2013.

Of course the headline figure needs some adjusting for the more “lucky” northern members compared to the south:

Among the Member States, the lowest unemployment rates were recorded in Austria (4.7 %) and Germany (4.9 %), and the highest in Greece (27.0 % in June 2014) and Spain (24.4 %).

800px-Unemployment_rates,_seasonally_adjusted,_August_2014

It is true that on a yearly based, unemployment is falling slightly, with most member states reporting falls, but it is still extremely elevated and compares extremely poorly to that of the US:

800px-Unemployment_rates_EU-28,_EA-18,_US_and_Japan,_seasonally_adjusted,_January_2000_-_August_2014_

My main concern has always been youth unemployment and this is where I believe the ECB – and the EU governments in general – have failed miserably.

800px-Youth_unemployment_rates,_EU-28_and_EA-18,_seasonally_adjusted,_January_2000_-_August_2014

While moderating recently, these levels are debilitating long term and will only go towards further fracturing the fragile union.

The same policies of the past have shown not to work – the ECB “everything it will take” – and its more than ever time for the unconventional approach. This requires leadership and responsibility,  which is lacking both in Brussels and where the power truly resides – Germany.

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Comments

  1. Dont forget these economies are fending off another dip into recession.

    They may be treading water with unemployment – and you are right they have failed miserably on unemployment, particularly youth unemployment – but there isnt much sign of any sort of genuine rebound in employment.

    In the foreseeable future (this coming winter – maybe as little as 8-10 weeks away) they would need to be thinking about how to address a gas cutoff risk, and lots of agricultural producers have seen their largest growth market coughed up……thats before we see that Russian capital flows have dried up and are now flowing in the direction of Hong Kong instead of pumping maybe 70 billion a year into the EU

    • Indeed G – the Xmas retail cycle will be vitally important in the medium term for Europe. The IP numbers recently do not make for good reading and the Euro cant fall fast enough IMO…

  2. For those who may have missed this … posted earlier. An excellent perspective …

    The Sick Man Of Europe Is Europe … Joel Kotkin … Forbes / New Geography

    http://www.newgeography.com/content/004535-the-sick-man-of-europe-is-europe

    … extract …

    Europe’s poor economy stems in large part from policy. The strong welfare state so admired by progressives here has also made Europe a very expensive place to do business. High taxes and welfare costs, long tolerable in an efficient economy like Germany, have a way of catching up with companies and countries. This has been particularly notable after the financial crisis; since 2008 the unemployment rate has shot up 5 percentage points while dropping steadily in the Untied States.

    The European-wide embrace of “green” energy policies has been tough particularly for manufacturers. Under Chancellor Merkel, Germany has embraced a massive shift to green energy that has helped raise electricity costs for companies by 60% over the past five years to double the rates in the United States.

    • Well I’m not against green policies, but it’s true that Germany has screwed the rest of Europe for the betterment of Germany.

      Germany lost the field battles but won the economy hands down and is now extracting their own reparations.

      • Actually mig I thought that you had picked up a lot of knowledge lately and the standard of your posts had lifted considerably, so well done for that.

    • Peter is right on that one – its less about “socialism” (sic) and the relative costs of green energy than about the German style of capitalism within a currency union that is all in its favour.

      As I said earlier they have a lot to be admired for in terms of domestic policy (housing, civil rights, education, healthcare, Mittlestand etc) but their European policy stinks of hypocrisy.

      IMO best thing for EU is for Germany to leave and readopt the Mark. And then break up anyway – long term they are better off as sovereign states.

      • It’s a complex issue Chris. Rather than criticising Merkel and her predecessors who did an outstanding job of looking after the interests of Germany, the blame should be placed at the feet of the other leaders who frankly were weak and lacked foresight – faults that we can’t level at the Germans.

        I don’t believe they will breakup the EUZone, so my hopes rest with Draghi who just might be able to turn it into a real currency union like the USA. If they don’t achieve that it will always be a time bomb even after the good times come back. Maybe it’s just too tribal to achieve that, I don’t know.

      • the blame should be placed at the feet of the other leaders who frankly were weak and lacked foresight – faults that we can’t level at the Germans.

        Exactly. Many say the union as a chance to just spend their time in the sun on the beaches paid for by cheaper debt….quiet literally…

      • Give it time…..

        Look at the rise of UKIP in the UK (and the UK is where they have seemingly refloated a housing bubble to propel the economy in the short term)
        Look across France at Marine Le Pen’s outfit and the quasi nationalisation of the French economy [competitiveness issues and all – not that that really matter in France].
        Spain is not one skerrick closer to dealing with its real estate overhang than it was 4 years ago.
        Portugal has its sights on paying off its bailout – all good and well, but what does it do after that apart from hope it gets some tourists.
        Those Italians have an awful lot of outstanding sovereign debt to negotiate and while most of it is purchased in Italy, they have a major bank with questions all over it [and what is on its balance sheet] and only the printing of the ECB to prevent other banks asking about counterparty risk.
        Then look at Slovenian or Czech banks……
        The Greek sovereign……
        The Hungarian sovereign………
        Dutch short term paper…….
        The cured Irish economy complete with households underwater while they need to inflate a housing bubble again to drive growth, lest they get fingered by the EC for taking someone elses demand with tax breaks for multinationals….
        German short term paper and a stubborn (and quite plausible) refusal to pay off what it sees as everyone elses problem, with a Euro it can use quite nicely (for the time being, while a demographic timebomb tics away in the background and with some very big banks on seriously stretched capital bases)
        The Poles (keep pushing those apples fellas), the Danes(now this is a private debt issue) and everyone else (They like unmarked envelopes in Bulgaria and Romania).

        There is no forthcoming solution in the Eurozone anywhere.
        There is palliative care in the form of QE.

        Their only likely growth comes from absorbing one of Turkey (but they are Islamic) Ukraine (But they are awfully corrupt and they border the Russians, it could come with a big price tag) or coming to a deal with Russia (but what to do about all those Russians who would rock up in an instant? and could they really sit at the same table?)

        They need a fiscal side, but to go there they need a bit of honesty with their own people – of all nationalities – and they couldnt handle that.