Conditions may be worsening in the Eurozone as recently released unemployment numbers point to a moderate up-tick. While the Eurozone’s problems are not entirely unexpected, conditions appear to be stagnating—and in some cases worsening—in other labor markets around the world. What could this mean for the global economy?
The Eurozone’s news is particularly disheartening
Employment in the Eurozone dropped by .1 percent in the second quarter, which is a full 1 percent lower than YOY. The Eurozone’s news is particularly disheartening given that the economy actually grew during the second quarter. This marks the first time that the economy has grown in 28 months. Still, if the economy has indeed returned to growing, there is hope that employment numbers could improve in the near future.
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The unemployment rate in the Eurozone has dropped by 1 percent YOY, suggesting that conditions may gradually be stabilizing, if not improving. Still, the unemployment rate in August increased by about .1 percent from July, as companies continue to lack confidence to expand payrolls. Even worse, the Eurozone’s economy is believed to have contracted by about .5 percent in the second quarter, which could lead to future layoffs.
United States economy added jobs in August
The United States economy added jobs in August, though actual participation in the labor force actually declined. This means that while the U-3 employment rate may be falling, much of the decline can be contributed to people either giving up looking for work, or accepted part-time jobs while desiring to work full-time. Whereas the Eurozone’s economy declined in the second quarter, the United States economy expanded by a healthy 2.5 percent (YOY).
Canada saw a moderate decline in unemployment numbers as nearly 60,000 jobs were added to the economy. Canada’s unemployment rate of 7.1 percent is worrisome given that Canada actually managed to dodge the worst fallout from the 2009 financial crisis. Now, Canada’s employment rate has risen high enough to rival the United States, which was slammed during the crisis. This shows that Canada’s economy may not be as well-positioned as previously thought.
U.K. has been adversely affected by the Eurozone crisis
The United Kingdom also reported a moderate .1 percent decline but still remains at an uninspiring 7.7 percent. While the U.K. has been adversely affected by the Eurozone crisis, it has not been as directly impacted as members of the Eurozone. The economy grew by a sluggish .7 percent in the second quarter, though growth will likely remain restricted until the Eurozone sorts out its problems.
Like the Eurozone, Australia also saw its unemployment rate increase from 5.7 percent to 5.8 percent. While the increase of .1 percent does not mark a substantial increase, the fact that Australia was once arguably the West’s best performing economy is worrisome. Still, the Australian economy is showing resilience, and the economy managed to expand by 2.6 percent in the second quarter.
Most likely, the increasingly dire employment numbers do not point to an immediate crisis. Such restricted hiring, however, could restrict long-term growth. Most modern economies are driving by consumer demand, and most developing economies rely on consumption to drive demand for manufactured goods.