We have heard quite a bit about that string of grapes across the Atlantic, and most has not been good. The refugee situation has magnified their long-term individually debated and addressed issues of how to deal with their shrinking populations on one hand and the prospect of massive Muslim immigration, which would change their cultures but allow continuing funding of their lavish social programs, on the other. What else is going on there, and how does and will it affect their joblessness and ours?
First, on jobs, the continent is in bad shape. Average Eurozone unemployment reached 10.5% in November, and that was on the way down. That conceals an atrociously high age 15 to 25 jobless rate of 20% overall, with individual countries, as of the fourth quarter of 2014, achieving rates such as 52% for Spain, 51% for Greece, and even 42% for Italy and 25% for France. Their shares of long-term unemployed are much higher than in the United States, where 26% of jobless have been out for 27 weeks or longer; of the 27 European Union countries, only Denmark, Sweden, Finland, Austria, and Luxembourg have below 30% of their unemployed without work for a year or more.
Second, the Schengen agreement, which allows Europeans to travel between countries without passports or border checks of any kind, is seriously endangered and is likely to be splintered if not obliterated. I expect some subgroups of nations, such as Belgium, the Netherlands, and Luxembourg, to keep their mutual borders open, but it will prove unworkable to maintain it on its current scale. With that, there will be conflict about whether to continue the Euro. There could also be sets of two and three countries continuing to share a currency, but it has already proven tenuous to keep the likes of frugal Germany and profligate Greece under one central bank. Either of these changes would hurt European prosperity and thereby cut jobs overall, but would, of course, create more in the fields of security, administration, and currency exchanging.
Third, along with the United States, Europe has been hit hard by China’s slowdown. Sales of construction materials for their massive infrastructure work, and of consumer goods for their increasingly higher-paid workers, went nowhere but up for decades, but have now not only leveled off but actually decreased. The worldwide oil glut has largely been caused by slowing Chinese demand. Europeans are not finding it any easier to adjust to the dwindling of such a large customer than we have in America.
Fourth, despite all these problems the continent’s economy may be improving. German unemployment was down to 6.1% in December, compared with 5.0% in the United States. Ireland and Great Britain reached seven-year lows this fall, at 8.9% and 5.3%. Eurozone economic growth reached an annual 1.6% in 2015’s third quarter, or about twice the previous 12-year average. Its jobless rate is down from 2013’s 12.0%, and manufacturing and consumer confidence are both at two-year highs.
So, are the problems above, as they have been manifested in the recent stock market fall an indicator of a coming world recession? That is quite possible but far from certain. Can the United States avoid it? Probably not. We are too entwined with Europe and China to avoid their worst problems. Yet we may continue, as we have been, doing better. What may become (and already is, if you are under 26 in the European Mediterranean) a depression and near-depression in these places may be held to an ordinary periodic recession here. Just the same, it’s nothing for our next president to look forward to.