[Pen-l] U.S. Jobless Rate Likely to Pass Europe’s

[Nicole Woo <woo@xxxxxxxx>]

U.S. Jobless Rate Likely to Pass Europe’s
http://www.nytimes.com/2009/05/23/business/economy/23charts.html?ref=business

By FLOYD NORRIS
New York Times
Published: May 22, 2009

FOR many years, unemployment in the United States was lower than in
Western Europe, a fact often cited by people who argued that the
flexibility inherent in the American system — it is easier to both
hire and fire workers than in many European countries — produced more
jobs.

That is no longer the case. Unemployment in the United States has
risen to European averages, and seems likely to pass them when
international data for April is calculated.

“The current economic crisis,” wrote John Schmitt, Hye Jin Rho and
Shawn Fremstad of the Center for Economic and Policy Research, a
research organization in Washington, “has turned the case for the U.S.
model almost entirely on its head.”

In March, the American unemployment rate stood at 8.5 percent, the
same as the average rate for the first 15 members of the European
Union — the countries that were part of the group before it began to
expand into Eastern Europe.

Because countries calculate unemployment rates differently, the rates
used in the accompanying graph are the harmonized rates calculated by
Eurostat, the European Union’s statistical agency. Harmonization does
not change the American rate, but does affect some other rates.

Eurostat publishes harmonized rates for the entire European Union and
for three countries outside the union, the United States, Japan and
Turkey.

In April, the rate in the United States rose to 8.9 percent. When the
European figures are compiled, it seems likely that the American rate
will be higher for the first time since Eurostat began compiling the
numbers in 1993.

For men, the unemployment rate in the United States surpassed that of
the 15 original European Union countries in December. By March, it was
9.5 percent in the United States, compared with just 7.5 percent for
women. The figures for men and women in the 15 European countries,
however, are close together, at 8.4 percent and 8.5 percent.

The tables show how rates compared in various countries in March — or,
in the case of some countries that are slower in compiling numbers, in
the latest month available — and three years earlier, in March 2006,
as the American housing boom neared a peak and economic growth was
strong. Then, the United States had an unemployment rate of 4.7
percent, lower than all but three of the 15 European Union countries —
Denmark, the Netherlands and Ireland — and equal to that of a fourth,
Luxembourg.

As the graphic shows, the March rate for the United States was higher
than the rates of 11 of the 15. The exceptions were Portugal, which
has the same rate, and Spain, Ireland and France. Eight of the 15
European countries have rates that are lower than three years ago.

How did that happen during a worldwide recession? First, it appears
that the safety nets in many Western European economies made it easier
for people to keep their jobs as the economy declined. In Germany,
programs allow companies to get government help in paying workers, for
example, keeping them employed. If the recession becomes severe enough
and long enough, of course, it could turn out those programs do not so
much avoid the pain as defer it.

Another factor may be the lack of an economic boom in many European
countries, which has left them less vulnerable to recession-related
cutbacks.

There is, and always has been, a large variation in economic
performance among Western European countries. Even though workers
generally have the right to move between countries in the European
Union, doing so presents language and cultural hurdles for many.

In the United States, there has been more movement of workers from
depressed areas to places where the employment outlook is brighter.
But the housing crisis appears to be hampering such movement because
some workers own homes that are worth far less than the amount they
owe on their mortgages.

Among the 15 European Union countries, the national unemployment rates
range from 2.8 percent in the Netherlands to 17.4 percent in Spain.
That is a wider spread than the ones among American states, where the
rates range from 4.2 percent in North Dakota to 12.6 percent in
Michigan.

Spain and Ireland, two of the highest unemployment countries in
Western Europe, suffered housing booms and busts that were comparable
to the cycle in the United States. Unemployment is also particularly
high now in the Baltic states, Estonia, Latvia and Lithuania, which
ran up large trade deficits during the good times and are suffering
now that it is much harder for them to borrow money.

Floyd Norris’s blog on finance and economics is at nytimes.com/norris.
--
Nicole Woo
Director of Domestic Policy
Center for Economic and Policy Research (CEPR)
1611 Connecticut Ave. NW #400
Washington, DC 20009
202-293-5380 x108
woo@xxxxxxxx
www.cepr.net
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