Once a job seekers' paradise, the US & Europe have murky job marts now

Last Updated 19 January 2010, 14:32 IST

The latest data tempered hopes in Europe and the United States for a rapid recovery that did not depend on large doses of government support.

Before the American report was released, many analysts were predicting that the number of jobs there might increase for the first time since the recession began in December 2007. But the estimated net loss of 85,000 jobs, while a vast improvement over the situation for much of last year, pointed to continued reluctance on the part of employers to hire new workers.

At a news conference, President Obama acknowledged the American data as a setback, while outlining plans to deliver $2.3 billion in tax credits to spur manufacturing jobs in clean energy. “We have to continue to explore every avenue to accelerate the return to hiring,” the President told reporters.

In Europe, which typically lags behind the United States,  job losses continued to mount as the unemployment rate inched up to 10 per cent in November, from 9.9 per cent, hitting the highest level since 1998,  a year before the euro was created. “It’s a recovery, but it’s a weak, U-shaped recovery,” both in Europe and America, said Arnab Das, Global Head of Market Research and Strategy at Roubini Global Economics in London. “We’ve lost a lot of jobs and it will take some time for creation to kick in. There is still enormous slack in the market.” Of the two regions,  job seekers in America might be in a slightly better position to benefit from an upswing, analysts said. During past recoveries, labor markets in the euro area have taken longer to improve than the United States because the American job market is more flexible, making it susceptible to sharper swings.

The unemployment rate in the United States, which is based on a separate survey from the job numbers, was unchanged at 10 per cent, but only because huge numbers of unemployed people remained pessimistic about their prospects and had given up, at least for now, on their search for work.  But in a twist that highlighted the erratic nature of economic renewal, the data pointed to a minuscule increase of 4,000 jobs in November — rather than a loss of 11,000 the government originally estimated. If that holds up through future revisions, it would be the first monthly gain in two years. Another 16,000 job losses were added to October’s tally.

The American report “shows that there is going to be some difficulty in making the transition to move from the end of firing to actual hiring,” said Julia Coronado, senior United States economist at BNP Paribas. “Eventually we will see some job growth, but there are a lot of weak patches still in the economy.” Christina D Romer, Chairman of Obama’s Council of Economic Advisers, called the report a “setback” but echoed the view of a number of private economists that the United States economy was likely to move to overall job creation sometime early this year.

In Brussels, the European Union’s statistics agency, Eurostat, said that the number of unemployed in November rose by 102,000 in the 16-member euro area, a significant increase but well below the peak of 475,000 jobs lost at the start of the year. The 10 per cent jobless rate contrasts with an 8 per cent rate a year earlier.

“We think that the labor market correction has a long way to go” in the euro area, said Nick Kounis, Chief European economist at Fortis Bank in Amsterdam. “Employment has still not fully adjusted to the fall in output during the recession, reflecting institutional rigidities in the euro zone labor market.”

Highlighting the difficult business climate, Anheuser-Busch InBev, the world’s largest brewer and the maker of Budweiser and Stella Artois beers, said that it would cut some 10 per cent of its work force in Western Europe, including hundreds of jobs in Germany and Belgium. InBev declined to give a figure for the total number of jobs to be cut.  The unemployment rate for the broader 27-member European Union was 9.5 per cent in November, Eurostat said, from 9.4 per cent in October and 7.5 per cent in November 2008. Das of Roubini Global Economics pointed to significant differences between European nations. Jobs in countries like Germany appear to be safer, as that economy is benefiting from increased demand for its manufactured exports, like high-end automobiles, machine tools and capital goods, particularly from emerging markets.

The Eurostat data showed that seasonally adjusted unemployment in Germany was 7.6 per cent, unchanged from October. Years of wage restraint have also helped make German companies competitive on a cost basis, protecting orders and jobs. Data released by the Federal Statistics Office showed that German exports rose again in November, increasing by 1.6 per cent on October.

The European unemployment rate would almost certainly be higher if governments like France and Germany had not established programmes that offer support to companies putting workers on shorter hours to help cushion the effects of recession. France’s publicly financed partial-unemployment programme allowed companies experiencing exceptional difficulties — like PSA Peugeot Citroën, the automaker — to lay off staff members temporarily and to draw on state funds to pay them during those periods.

Germany also has measures to reduce working time, many of which are specifically framed as employment-saving measures. The federal Kurzarbeit system, which translates as “short work,” offers a state-supported backup for enterprises resorting to short-time working outside the provisions of collective agreements. In France, the rate stood at 10 per cent, up from 9.9 per cent in October. For Italy, the rate was 8.3 per cent, up from 8.2 per cent a month earlier.

The lowest European rates were in the Netherlands, at just 3.9 per cent, and Austria, at 5.5 per cent, Eurostat said.

In other European countries, the strains of the swift collapse in house prices and consumer confidence have created greater imbalances and are taking a greater toll on workers. In Spain, for example, unemployment in November hit 19.4 per cent, the second-worst figure in Europe behind tiny Latvia, at 22.3 per cent. In Spain, unemployment among people under 25 years old has now touched a shocking 43.8 per cent.

  Andrew Watt, a senior researcher at the European Trade Union Institute for Research in Brussels, said labour market flexibility would be less of a factor in defining near-term changes in unemployment in European and America than whether factories and other producers could reach sustained growth of output that goes beyond simply restocking depleted inventories. “Flexibility is a long-term issue,” he said. “The level of growth is what will drive the unemployment data.”

(Published 19 January 2010, 14:25 IST)

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