Falling Unemployment, Rising Confidence?
Europe Catches Up
One of the most notable results of the financial crisis of 2008 / 2009 was the rise in unemployment, especially in Europe. The additional pain the Continent suffered as compared to the UK or the US was the second leg of unemployment growth following the Greek debt crisis of 2011. The European unemployment rate started to decline in 2010 from 10.3% to 10.0% but in the summer of 2011 it started to move up again, which compounded an already serious problem created by the financial stress two years earlier, especially for southern Europe. It peaked at 12.1% in 2013.
The USA and UK also suffered job losses as a result of the financial crisis, but in a remarkable turn-around, the US unemployment rate has improved from a peak of 10% in October 2009 to the current level of 4.4% in virtually a straight line. The UK was a little slower in seeing an improvement in the unemployment rate with the peak of 8.5% being reached in 2011, before it started to fall to the current level of 4.3%.
However, Europe lagged and it was only in late 2013 that the unemployment rate started to decline from its February 2013 peak but the trend since then has been steady and impressive. The previously moribund southern European countries are now demonstrating some of the most impressive job growth with Spain, for example, seeing its unemployment rate decline from 27% to 17% in four years. Overall the European unemployment rate remains uncomfortably high at 9.1%, with much higher figures, especially for youth unemployment, in some southern countries. But it is the consistency of the direction of travel and the broadening out of the improvement which is notable.
Source: Factset. Data from 01.09.07 to 01.08.17
While employment is only one of measure feeding into any improvement in consumer confidence, and higher employment does not guarantee higher share prices, we are increasingly encouraged by the positive impetus in the European economy.
By Ian Enslin
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