Unemployment in Europe has climbed to an all time high in February; hitting the southern half of the continent the hardest. Unfortunately, this is the tenth consecutive month of a jobless increase to where it currently sits at 10.8% unemployment.
European leaders aren’t giving up easily however. All have vowed to find new paths to economic growth and job growth, while cutting budgets and reforming government spending. Unfortunately, in a time of crisis you must make the hard decisions that may hurt now but in the long run will save the economy, create more jobs and get you back on the path to economic prosperity.
While I wish I had some good news, the bad news still prevails. Another potential recession sign flashed “warning” across Europe when the manufacturing index dropped to a three month low in March. Now the tough times aren’t just happening in Greece, Italy, Spain and Portugal; the crisis is beginning to spread to the once-safe Germany and France. This is not a good sign because these two countries in particular are seen as the dividing line between recession and no recession. If they fall, you can expect a recession.
By the looks of it, Europe could be heading for a recession very soon. If the GDP contracts this first quarter of 2012, they will most likely be in a double dip. Economists are predicting that Europe does enter a double dip and that the highest unemployment will hit is 11% this year. Those are some pretty scary numbers and forecasts because they would send economic aftershocks around the world.
If Europe goes into a double dip and US corporate margins do peak, we could be looking at trouble. If you are a “super bull” right now, I would reconsider because as of right now we are walking the line for both factors coming true and there really is nothing we can do, the damage is done.
Could we have seen all of the year’s gains in the beginning of this year? Probably not but this European recession scare would certainly trigger a correction in the US markets on its own. US traders have long worried about a European double dip and if it actually came true, we could be heading for trouble. Bottom line, get some protection for your portfolio. Buy stocks that aren’t influenced by economic times and buy protection for stocks that would react harshly to a double dip.