If you want to feel better about the lackluster U.S. economy, take a brief statistical tour of Europe.
For all its woes, the U.S. economy is at least growing, with employers adding a modest 155,000 or so jobs per month. Europe, by contrast, remains stuck in a double-dip recession, and in many ways the European economy is getting worse, not better.
A pedestrian walks by as a homeless man sleeps on a metro air vent in Athens. (AP/Petros Giannakouris)
The unemployment rate in the euro zone — the 17 nations that use the euro as their currency — recently inched upward to 12.1%, a record high. By comparison, the U.S. unemployment rate peaked at 10% in October 2009, and has since drifted down to 7.6%. The U.S. unemployment rate hasn’t exceeded 11% since the 1930s.
In a few European countries, unemployment is so high it threatens their status as first-world markets. Spain recently displaced Greece as the sorriest economy in Europe, with an unemployment rate of 26.9%. That’s higher than the highest U.S. unemployment rate during the Great Depression. Greece remains right behind, with unemployment at 26.8%. Overall, 21 European nations (including several outside the euro zone) have higher unemployment than the United States. The double-digit club includes Ireland, with an unemployment rate of 13.6%, Italy (12.2%) and France (10.4%).
As the following chart from the Bureau of Labor Statistics shows, the unemployment rate in France, Italy and several other European nations has been rising, whereas the U.S. rate, while still high, has been falling consistently. It could take Europe several years just to get to the point of healing the U.S. economy is at now.
The European economy has suffered from many of the same problems as the United States, including credit and housing bubbles, followed by a financial meltdown and patchy economic healing. But Europe has deep structural problems the U.S. generally escapes. In countries such as Spain, Italy and Greece, many industries are dominated by politically connected unions that have managed to keep pay high even if productivity is below global standards. There are too many bureaucrats and not enough taxpayers. France, with some of the highest-paid workers in Europe, is suffering its third recession since 2008.
The European Commission did report in May that many struggling nations have made strides in tackling their protectionist tendencies. But it's typically a drawn-out, stutter-step process bedeviled by political machinations.
Europe also lacks a unified decision-making process with regard to taxes and government spending, which is another advantage the United States has. Washington is hardly a paragon of good government, yet the euro zone has 17 different versions of Washington that must come together to enact new policies. If your governing structure makes the U.S. Congress look good, you know you’ve got a problem.
The European Central Bank has also been less aggressive with monetary stimulus than the U.S. Federal Reserve, and more reluctant to medicate Europe’s ailing economies. That may eventually force discipline on some of Europe’s spendthrift governments but, for now, “austerity” is depriving the wheezing European economy of desperately needed oxygen.
A few European economies are chugging along, especially Germany, which has an enviable 5.3% unemployment rate. But the majority of European economies are going through painful transitions in which the government can no longer afford generous unemployment benefits or other forms of social welfare that have long been taken for granted. American workers, by contrast, may ultimately benefit from weak job protections that make it easy for corporations to lay off workers but also help keep companies profitable. Many U.S. CEOs say they’re ready to start hiring again and are only waiting for business to pick up.
The woeful European economy has depressed earnings at many U.S. multinationals, including McDonald’s (MCD), Ford (F), GM (GM) and IBM (IBM). But the links between the U.S. and European economies have weakened, and the U.S. seems poised to grow no matter how long Europe flails. America’s four biggest trading partners these days are Canada, China, Mexico and Japan, which combined account for nearly half of all U.S. trade. Only six European countries — Germany, the U.K., France, Switzerland, the Netherlands and Belgium — are among the top 15 U.S. trading partners, and they account for only about 14% of all U.S. trading activity.
With growth that may barely top 2% this year, the U.S. economy is hardly going gangbusters. And it would be doing better if Europe could get out of the doldrums. But for U.S. workers, there’s a bit of perverse encouragement that may come from knowing somebody else is worse off.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.
- Europe News
- Banking & Budgeting
- unemployment rate