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News : EU Economy Last Updated: May 13, 2010 - 7:48:36 AM

Impact of crisis on unemployment less severe in EU than in US
By Michael Hennigan, Founder and editor of Finfacts
May 12, 2010 - 3:39:13 AM

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Figure 7: Unemployment rate in February 2010 and increase in the rate since the start of the crisis in the EU27 by Member State, seasonally adjusted

EU/US Unemployment: The unemployment rate in the EU27 has grown since the first quarter of 2008 as a result of the economic crisis. However, the increase has been smaller than in the US, where the rate has overtaken the EU27 despite having been much lower at the start of the crisis.

On a more detailed level, similar patterns in the evolution of unemployment by gender and educational level during the crisis can be observed in the EU27 and the US. Long term unemployment is higher in the EU27, but rising fast in the US. In the first quarter of 2010, the seasonally adjusted unemployment rate in the EU27 was 9.6%, just below the rate in the US which stood at 9.7%. US unemployment before the crisis was at its lowest level in the second quarter of 2007 at 4.5% and peaked in the fourth quarter of 2009 at 10.0%. In the EU27, unemployment started to rise in the first quarter of 2008, when it stood at 6.7%. Since then, the unemployment rate has increased to reach 9.6% in the first quarter of 2010. While the rate continued to rise in the EU27 in the first quarter of 2010, it decreased in the US.

These data come from a publication, Impact of the crisis on unemployment so far less pronounced in the EU than in the US, issued on Tuesday, by Eurostat, the statistics office of the European Union.

Eurostat reported last week that between 2000 and 2009, employment in the agricultural sector in the EU27 decreased by 25%, the equivalent of 3.7 million full-time jobs. It fell by 17% in the EU15 and by 31% in the 12 Member States (NMS12) that joined the EU in 2004 and 2007. In 2009, employment in the agricultural sector was equivalent to 11.2 million full-time jobs in the EU27, of which 5.4 million were in the EU15 and 5.8 million in the NMS12.

Despite enduring the worst recession since 1945, Germany achieved a remarkable success in holding unemployment growth at about 200,000 from an October 2008 low to early 2010, through a mix of short-time work, flexible labour contracts and healthy companies coming into the downturn. The biggest European economy was the only one of the EU27 which had higher employment in March 2010 compared with March 2009.

Brookings Institution economist Gary Burtless, commented on Monday that longtime job seekers now represent 46% of the US unemployed, an astonishingly high percentage. To put this number in perspective, in previous recessions the peak fraction of unemployed who have been unemployed longer thansix months is rarely more than one-quarter of the unemployed. In the worst post-war recession, which occurred in President Reagan's first term, the percentage of unemployed workers jobless longer thansix months reached a peak of less than 26%.

Compared with other rich countries the United States has a good record of keeping average unemployment spells brief. Among the 21 wealthiest OECD countries, only Canada, New Zealand, and Norway had a smaller percentage of long-term unemployed in their jobless populations in 2008. In that year only about 20% of unemployed workers in the United States had been jobless for 6 months or longer. In Europe the comparable percentage was about 55%. Part of the US success in holding down unemployment durations is traceable to meagre social protection for the long-term unemployed. In ordinary times Americans qualify for a maximum of 6 months of unemployment benefits. This benefit limit is shorter than the limit in other rich countries. When regular unemployment insurance comes to an end, social protection for America's long-term unemployed is quite low compared with what is available elsewhere.

SEE: Finfacts articles:

May 2010: US economic recovery is building momentum; Daunting challenge of the so-called "job gap"

May 2010: US jobs market underperformed the Eurozone and other economies in the decade before the Great Recession

Apr 2010: Eurozone annual inflation rises to 1.5% in April; Unemployment rate steady at 10% in March -- Germany only EU27 country where jobless rate fell from March 2009

Apr 2010: Germany's jobs miracle: Short-time work, flexible contracts and healthy companies; Unemployment rose only 200,000 from October 2008 low

In both EU27 and US, men more affected by unemployment than women,…

In the EU27, the unemployment rate was 9.8% for men in the first quarter of 2010 compared with 9.3% for women. For the first time since the beginning of the series in 2000, the unemployment rate for men overtook the rate for women in May 2009. In the US, the unemployment rate was 10.7% for men in the first quarter of 2010 compared with 8.5% for women. As in the EU27, the unemployment rate for men in the US rose more quickly during the crisis than for women. Between the third quarter of 2007 and the fourth quarter of 2009, the unemployment rate for men rose by 2.9 percentage points (pp) in the EU27 and by 6.5 pp in the US. The increases for women in the same period, 1.5 pp in the EU27 and 4.1 pp in the US, were smaller.

…high education reduces risks of unemployment…

In the EU27 and in the US, unemployment rates rose most strongly in absolute terms for those with the lowest level of education. In the EU27, the rate increased by 4.3 percentage points between the fourth quarters of 2007 and 2009 for those with less than upper secondary education, while it rose by 1.4 pp for those with tertiary level education. In the US over the same period the rate rose by 7.7 pp for those with less than upper secondary education, and by 3.9 pp for those with tertiary level education.

…and long term unemployment rises

In both the EU27 and the US, long term unemployment rose more than short term unemployment. However, long term unemployment was relatively high in the EU27 before the crisis, while it was low in the US.

In the EU27, the rate for short term unemployment (less than one month) increased by 0.1 percentage points between the fourth quarters of 2007 and 2009, while the long term unemployment rate (6 months and longer) grew by 1.3 pp. In the US, the rate for short term unemployment rose by 0.2 pp between the fourth quarters of 2007 and 2009, while the long term unemployment rate gained 2.9 pp.

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