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The Wilder View

Unhealthy developments across the euro area labour market

There are many ways to define rebalancing within the euro area: relative prices, trade, productivity, unit labor costs, etc. I’d argue that one could see it in the employment data as well, although it will take a long time to work its way through. Basically, Spaniards should move to Germany and vice versa to enjoy higher income and lower input costs, respectively, when looking for work or planning a business. Well, a lucky 5,000 young Spaniards will get the chance for apprenticeship in Germany thanks to a recent deal between Germany and Spain. But with 770,100 Spaniards aged 15-24 unemployed in Spain, 5,000 German jobs is not going to go very far. So what’s happened to date?

Eurostat released its annual detailed report of the labour force in Europe. I dug around a bit and found some interesting stats. The gist of what I found is the following: employment in the periphery markets has plummeted with no seeming end in site. Notably, 2012 employment levels in Portugal and  Greece are 299,000 and  356,000 lower than their respective 2000 levels.

Note: Please click on all charts for a closer look.

Since 2009 (end of that recession), out of the EA11 (EA 12 less Luxembourg), 1.7 million jobs have been added regionally, while 3.2 million jobs have been lost. The balance is wholy uneven and skewed toward job loss. I expect this pace to pick up, as hoarding runs its course.

Since 2009, 5 countries added jobs with the heavyweight, Germany, accounting for 84% of the new jobs, while 6 countries cut employment with Spain accounting for 50% of that. Interestingly, the Italian labour market has only seen 169,000 jobs lost since 2009 despite seeing seven consecutive quarters of negative GDP growth as firms presumably hoard workers. Given the downbeat outlook for Italy, the employment statistics are likely to worsen materially in coming quarters.

Since 2000, the composition of employment in the euro area has shifted from craft, clerical support, and plant operators to service and sales, technician and associate professionals, and professionals across all countries with no obvious bias in the periphery over the core.

I thought that this was interesting: I had expected a sharp increase self-employment as a share of total employment in the perihpery economies, as the governments layoff workers and firms delever. This trend is only in its nascent stages. The trend of rising self emplomynet is there in Greece and the Netherlands (the Netherlands labour market is bleeding – see table above) but maybe only just beginning in Spain and Portugal. This could be the first official data that indicate growing shadow economies.

I see unhealthy developments across the euro area labour markets – developments that are not truly indicative of “rebalancing”.

Rebecca Wilder

5 Responses to “Unhealthy developments across the euro area labour market”

jack strawJune 12th, 2013 at 6:36 pm

2% unemployment rate in North Dakota. That's with a LOT of Government actually…and a State Bank ironically enough. "going forward" presents a challenge…i agree. "sustaining these job prospects" is always a challenge. obviously trade unions (we used to have those in the USA) were instrumental in creating "the other wealth effect." i take note there is not mention of this by Ms…is it Wilder? Interesting article of course and goes to show the power of NEW money in a capitalistic system. "this is always the most precious" of course. who knew right? "there are different types of paper" even though the currency pretty much always looks the same? "but dangers await in the new" as well. if it was as easy as "just going out and getting a job" we'd all have one, right?

NickJune 21st, 2013 at 5:44 pm

Is "rebalancing" something economies are supposed to do after recessions? Looks more like businesses have learned to replace their previously highly paid low skilled jobs either with technology or outsourced labour. In other words a structural change is taking place that will "rebalance" the economy, but in a different place than where it was before. The implication is that there are far fewer jobs available to unskilled school leavers and that whole sector has a new choice, either develop some specialized skills which are in demand or become a low wage low skilled worker. This is likely what is behind some of the unrest we are seeing in Turkey and Brazil and likely soon in other countries as well.

llisa2u2June 22nd, 2013 at 2:34 pm

"Looks more like businesses have learned to replace their previously highly paid low skilled jobs either with technology or outsourced labour. In other words a structural change is taking place that will "rebalance" the economy, but in a different place than where it was before. "

The facts may actually be that those "previously highly paid low skilled jobs" were NOT really low skilled jobs at all. I presume that what is probably the general category of "low skilled jobs" is a reference to jobs that were manufacturing process tasks. Many of these tasks are actually highly skilled separate tasks. During the manufacturing process, if any individual fails to perform the task "as needed according to engineering specifications" the resulting product will fail, and not be useable. I think it is important to recognize- could you manufacture a light bulb by yourself? Could 5 people that you know manufacture a light bulb with their own hands? What can you make by yourself? What can you produce by yourself?
It is very easy to repeat generalizations that are excuses for hiding facts that the "real" economy is NOT rebalancing. In fact, what Wilder refers to with really only one line- "This could be the first official data that indicate growing shadow economies."- is a very big red flashing warning indicator.
Outsourcing of labor to lower wage based economies has done nothing to improve the economies that have in fact lost employment opportunities, that will never return. I am not particularly "in awe" of Steve Jobs, however, he was somewhat honest in one public statement, attributed to him- "those jobs aren't coming back". The implications for the majority of youth internationally really includes many future difficulties to survive and to live in an international economy based on extremely low wages and high costs for those same young people to have any expectations to purchase advertised, and flaunted "as easily available" material goods. In reality, there is an extremely increasing inability to maintain or attempt to even attain "ownership" of material goods in 2013, or in the future. Even attaining "specialized skills" are absolutely no assurance of not becoming a low wage, low skilled worker. No one can own much, or attain any power, if the majority can own absolutely nothing. There is no reason then for any individual to psychologically need to "protect" anything, including their own lives, as no "hope" factually exists.

Over the last few weeks, I have had an opportunity to do a lot of driving around the Denver, Colorado,USA area. Yes, I see signs of a real shadow economy in many of the very large "old" neighborhood infrastructures. It sure doesn't look pretty. Centennial is a nice boomey enclave, and there are other "enclaves". However, a few enclaves are supported and encircled by mass areas of minimal fringe and barely surviving economies. I don't intend to just play a game of semantics, with my word choices. Right now I am thinking that the old Latin root words and later words are very important to understand. In Wikipedia, look up "enclave". The references to understanding "exclaves" and "peculiars" are significant. The issues of "sovereign state" and non sovereignty has many implications for the individual and citizens of the state.

As a possibly interesting note, Just thought I'd mention that even E-470 toll road isn't even owned by the state of Colorado, it's actually owned by an international company based out of Spain or Portugal. So any tolls don't necessarily even cover expenses to maintain that road, or possibly never go back into any state revenues. I haven't investigated those facts very diligently. However, the superficial facts kind of remind me of some really ancient practices and control issues that never contributed to sustaining a local state or society.

No, the economy or economies aren't rebalancing, but there are a lot of changes occurring that appear to me to actually be more of a "fracturing" and "separating" from within of prior larger, more stable economies. There is a lot of scrambling by a lot of people to function within, those fractured economies. Most are getting pushed out of the way, and are falling down, and are blocked from entering into the new "private enclaves". So, the majority are factually WITHOUT. What will be the new products of those in the "without enclaves"? What can they produce? I'm one of "they". I sure can't produce much of anything, individually.

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