Yes: Italy, Spain and Greece still have massive unemployment. But the Euro Zone picture isn’t awful when compared to the United States.

You’ve probably been hearing about the insanely high unemployment numbers for some European countries for the last several years — the number I most hear associated with Spain is 27 percent, and over 50 percent of youth, while similarly horrible numbers come back from Italy, Greece and other spots. (Poland, however, is doing pretty well these days.)

Turns out the picture is not necessarily as bad as you might think, per The Wall Street Journal First off, check out this chart:


If you look at labor force participation — which is a big stat when you’re discussing unemployment-related topics — the U.S. is actually slightly below the eurozone in terms of current prime working-age population (25 to 54). Now, of course, the U.S. is doing much better than the entire Euro Zone — and definitely than Italy — on the 15-to-24 range, meaning that the future might not be bright for some of these European countries (then again, it might not be bright for Americans in that age range either).

Then, there’s this:

The unemployment figures flatter the U.S. labor market. That is because a major contributor to the fall in the U.S. unemployment rate has been the withdrawal of large numbers of Americans from the workforce. The number of people employed has expanded—though data suggest only in line with the working-age population. But the labor-force participation rate—the number of people both in work and seeking work as a percentage of the total population—has shrunk.

By contrast, this rate has stayed largely unchanged in the euro zone. “If the euro area had seen a drop in the labor-force participation rate proportional to the decline experienced by the U.S., its unemployment rate would be 9.5%, below where it was at the beginning of the sovereign-debt crisis,” wrote Thomas Klitgaard and Richard Peck, two economists at the Federal Reserve Bank of New York, in a blog post this month.

Here’s that blog post, FYI.

There are two things to contextually remember about the eurozone job picture. First, older women are now an active part of it, which is a huge new trend for Europe:

On the other side of the Atlantic, demographics is also at play, though it is increasing the number of people in work. The growing participation of women—and, in particular, women over the age of 45—in the workforce is the biggest factor shaping the labor market, suggest Messrs. Klitgaard and Peck. The trend for women over the age of 45 is evident in the three largest euro-zone economies: Germany, France and Italy. This is a cohort of women who, unlike their mothers, are accustomed to working and are now crossing the 45-year-old threshold.

But the flip side is — the real growth in Europe may be non-existent:

Another is what underlies the euro zone’s employment performance: very weak growth in productivity—a measure of the efficiency of economic output. While U.S. productivity grew 1.5% annually from 2008 to 2012, euro-zone productivity grew barely at all. If that sickly performance becomes entrenched, it will hurt economic growth for the long term.

While the numbers aren’t necessarily great, economists believe the eurozone is stabilizing.

I always think eurozone comparisons are tough — the countries that comprise it are so different — almost in the same way that true state-by-state analyses in the U.S. are contextually confusing sometimes (economies in Washington, Michigan, and Louisiana are very different animals). I think the situation with Europe is probably fairly drastic, especially at the youth unemployment side (as of January, I think the youth unemployment rate Europe-wide is 23.8%, which is down from the last surveys, but still about twice to three times what it ideally would be). I’m not sure either “side of the pond” has a tremendous plan for their next generation to fully enter the workforce, although U.S. growth makes it easier to get a job on this side, I’d imagine.

Ted Bauer


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