Why Are US Job Numbers Better Than Europe’s? Thank the Deficit!

[xchrom]

http://www.alternet.org/economy/153716/why_are_us_job_numbers_better_than_europe%E2%80%99s_thank_the_deficit!/

Last Friday, Eurostat released the latest European unemployment data for November 2011. The results were horrific, with unemployment rates in Spain now close to 23 percent (as at November 2011 and rising) and Greece 18.8 percent (as at September 2011) and rising. Greece’s unemployment rate rose 4.8 per cent in the first 9 months of last year. By contrast, the US jobless rate dropped to a near three-year low of 8.5 percent.

Looking at the US data one certainly does not see a boom, but there is a pervasive pattern of improvement that is not consistent with anything seen in Europe. So why would the US data look better even though we are programmed for some fiscal restriction, the household savings rate is too low, the global economy has weakened, and there is no big increase in equity and home prices?

The answer could be very, very simple. Three years of “horrible” budget deficits in excess of 8 percent of GDP have managed to do something critical to help the economy. How? Mainly in the form of what economists call “automatic stabilizers” – things like unemployment insurance and food stamps that put money in the hands of consumers during a downturn. By running deficits, we have been able to put a floor on demand and generate at least a modicum of economic momentum, which is slowly leading to an improving job situation.

Of course, you wouldn’t know this if you turned on the TV.

[dipsydoodle]

1. Extremely odd comparison using Spain and Greece.

[Demeter]

2. Come ON, x!

You know the US numbers are bogus, and that the ACTUAL, unretouched number for unemployment is 22.5%...

AND that's in spite of all the money pumped into the banks around the world which has inflated the deficit in many ways...

[xchrom]

3. yeah -- i know the ue numbers are higher than reported.

i just thought the article was interesting for the deficit stuff.

[dkf]

4. Stabilized maybe but not growing enough to fix the longer term budget problems.

[Ron Obvious]

5. One reason

One reason for the unemployment numbers being higher in Europe is that unemployment benefits are usually not time-limited, and are based on the amount you were earning before losing your job. Here in the US, an unemployed engineer who can't find a better job might go to work for Walmart or deliver pizzas. That's far less likely to be the case in Europe.

Whether that's better or worse for society depends on your point of view, but it doesn't show up in the unemployment numbers.