Tuesday, May 26, 2009

U.S. Jobless Rate May Soon Top Europe's

U.S. Jobless Rate Likely to Pass Europe’s

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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.

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