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The Economist: US Unemployment from a global perspective

By By Ray Perryman
July 27, 2013 at 2:27 a.m.


Since the national downturn, the U.S. job market has been slow to recover. While hiring has been fairly steady in recent months, the pace has been insufficient to meaningfully reduce unemployment.

Job gains have been around 200,000, but there are about 11.8 million Americans out of work, with another 2.6 million who have essentially given up and are no longer actively looking and, thus, no longer counted in some of the figures.

In addition, there are millions more who are underemployed, working out of their fields at less-desirable jobs or forced to take on part-time positions.

Clearly, at this 200,000 gained per month rate, it will take a long time to push down unemployment; the working age population increases by well over 100,000 per month. In fact, the U.S. remains well below the job levels observed prior to the recession.

Looking at unemployment from a more global perspective can shed light on our status and progress. It also provides a yardstick to measure against - how other developed nations are faring as they emerge from the recession.

A ranking of 202 countries tracked by the Central Intelligence Agency places the United States near the middle in terms of the percent of the labor force that is without jobs. Of course, this data is difficult to come by for many nations, and the estimates are at times dated.

Many of the lowest unemployment rates are from nations in which women don't tend to work or be counted as part of the labor force for cultural reasons, but other highly developed economies do very well, such as Switzerland or Norway.

At the bottom end of the spectrum are 16 countries in which the unemployment proportion is higher than 40 percent. Most of these areas have very little in the way of natural resources or infrastructure and have far to go before they can see meaningful economic progress.

Looking just at developed nations, the United States still falls in the middle of the pack. The Organisation for Economic Co-operation and Development tracks employment and labor market statistics for its 34 member nations that range from the most developed economies, such as the United States and those in Europe, to some still emerging, such as Mexico, Chile and Turkey.

There is some effort to ensure that the measures reported by the OECD are comparable, though the latest data out is somewhat dated 2011 and it is difficult to adjust for the many nuanced differences in collection and reporting protocols.

The lowest rates of unemployment are in Norway, Netherlands, Austria, Switzerland and Japan, all at less than 5 percent. The highest include Turkey, Hungary, Estonia, Portugal, Slovak Republic and Ireland, all at 10 percent or more as well as Greece and Spain at 17.9 percent and 21.8 percent, respectively. At the time of the OECD report, the US rate stood at 9.1 percent, higher than 22 of the 34.

Looking at the OECD's data over a slightly longer period of time (2004-11) for the percent of the working-age population that is working is also informative. Over that timeframe, 16 nations saw their participation rate rise, and another seven were essentially unchanged.

The United States, along with 10 other nations, saw the employment rate drop, meaning that a smaller proportion of the working age population was working. The other side of that statistic, the unemployment rate, also rose in the United States over that timeframe from 5.6 percent in 2004 to 9.1 percent in 2011. A majority of developed nations experienced falling unemployment over the period.

One aspect of the poor global labor market which has been getting a lot of attention lately is youth unemployment, with youth defined as those between the ages of 15 and 24. The United States tends to do better by this measure, fortunately, but some are calling it Europe's most pressing problem.

Unemployment rates for youth in Spain are a reported 50 percent, while they top 62 percent in Greece. Needless to say, these are alarming statistics in what they say about conditions both now and in the future.

German Chancellor Angela Merkel spoke of the potential for a "lost generation" if the problem is not addressed. The OECD went so far as to call for more government intervention, possibly including paying companies to hire.

I in no way want to minimize the situation with regard to youth, but like all statistics, the context is important. In those age groups, many people are still in school rather than the labor market. Participation rates are in the neighborhood of 10 percent, and many are in part-time or low-skilled jobs as they finish school or look for first jobs.

Moreover, targeting youth specifically for subsidies or other action makes little sense; the purely economic argument based on optimizing productivity and returns on investment suggests that it's more important to encourage hiring at higher levels of the skill spectrum.

Certainly, there are arguments for better higher education and training programs to prepare young people for the job market, and there are lessons to be learned from efforts such as Germany's successful dual system of academic study complemented by apprenticeships.

The job situation has been very difficult for persons of all ages, with individuals and families around the world facing a range of financial challenges as they struggle to find work. Across the globe, there are countries currently experiencing less unemployment than here in the United States.

I think there is reason to believe we will see some improvement here in the U.S. as uncertainty related to health care reform and other issues is worked out, the economy continues to show stability and even strength and more sustainable policies are crafted.

However, many of the struggling countries in Europe and elsewhere face even more difficult impediments to hiring, with little relief in sight.

M. Ray Perryman is president and chief executive officer of The Perryman Group (perrymangroup.com). He also serves as institute distinguished professor of economic theory and method at the International Institute for Advanced Studies.

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