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Economy in Brief

EMU Job Market Has Record Q1 Job Loss
by Robert Brusca June 15, 2009

The number of people at work in the Euro Area fell by 1.2mln in Q1, the greatest quarterly drop since records began in 1995. Still, that performance is dwarfed by the huge declines in the US as the percentage calculations in the table show.

Europe has been hurt badly but it is a region with far more labor market rigidities than the US. And those rigidities help employment during times of economic shocks. Employment in the Euro Area is down by just 1.3% Yr/Yr and unemployment is up by 20.9%. Compare that to the US where employment is down by 3.1% Yr/Yr and unemployment is up by 63% Yr/Yr. But even with those figures the ratio of the unemployed-to-employed is greater in the Euro Area than in the US. The fact is simply that the US unemployment rate was much lower than Europe’s before recession and now it has ticked up to the same general region as Europe’s rate.

Obviously the structure of the economy in Europe and in the US is very different. Still this recession has hit Europe hard. By its own metrics the labor market has been hit hard. The US is looking at one of its most severe recessions in the Post-war period. EMU has not been around long enough to make any such statement.

Through 2009-Q1 both EMU and the US are showing signs of an increased pace of job losses and an increased pace of unemployment. Monthly data in the US strongly support the notion that the unemployment mess is unwinding rapidly in Q2. At this pace of unwind the US could have job growth by August of 2009. We have no such bright future in hand for Europe.

While there is still a debate afoot about the US and whether it will spawn a strong or weak recovery, we can be sure that Europe’s will be slow in part because of all the disguised unemployment its labor force rigidities hide. Forecasts still foresee weak growth for the rest of the year in Europe. For the US that same forecast generally is in place but conditions in the US are shifting pretty fast and some forecasts have simply not been recast. Europe does not shift gears fast.

We can’t judge the recession to be than much harsher in the US than in Europe because of the jobs data and the greater US labor force displacement. There are simply different economic structures at work. But the figures are telling in terms of the impact on jobs in both EMU and in the US. GDP has been hard hit in both regions. In the US the GDP downturn simply dislodges more jobs. US GDP has fallen by about 6% (SAAR) for two quarters a row. In EMU the drops have been more like 7% and 10% at annual rates. Clearly jobs don’t tell the whole story of dislocation.

Growth rates by Quarter or period for various EU Nations
Saar: All Q1-09 Q4-08 Q3-08 Q2-08 2Qtr 4Qtr 5Yr
All Employed: EMU -3.3% -1.4% -0.7% 0.2% -2.3% -1.3% 0.9%
No Unemployed 39.9% 26.6% 12.0% 7.8% 33.0% 20.9% 0.5%
EA: Industry -5.3% -3.9% -1.7% -0.8% -4.6% -2.9% -0.8%
EA: Agric, Forestry -2.5% 0.8% -2.2% -5.5% -0.8% -2.4% -1.3%
EA: Construction -8.6% -8.7% -5.8% -4.6% -8.6% -6.9% 0.6%
EA: Wholesale Retail -3.8% -1.5% -0.2% 0.3% -2.7% -1.3% 1.0%
EA: Financial -3.9% -2.2% 0.3% 0.9% -3.1% -1.3% 2.5%
EA: Gov't Education 0.0% 2.2% 0.5% 2.5% 1.1% 1.3% 1.4%
Memo: Industry Employment
Germany -3.8% -0.1% 0.2% 1.0% -2.0% -0.7% -0.2%
UK (MFG)* #N/A -6.6% -6.3% -2.0% -6.5% -4.0% -3.4%
France (MFG) -5.8% -3.3% -1.6% -1.7% -4.6% -3.1% -2.0%
UK growth rates lag by one quarter
US Employment -6.7% -3.4% -1.9% -0.4% -5.1% -3.1% 0.4%
US Unemployment 88.0% 65.2% 61.8% 41.7% 76.3% 63.4% 8.3%
US MFG Employment -17.0% -9.4% -4.7% -4.1% -13.3% -8.9% -2.7%
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