Wednesday, April 3, 2013

The Eurozone Unemployment Picture

The unemployment rate for the currency bloc’s 17 nations was a seasonally adjusted 12% in February, up from 10.9% in February 2012. Among member nations with the lowest unemployment rates are Austria, at 4.8%, and Germany, at 5.4%, reports WSJ.. Among members with the highest unemployment rates is Spain, at 26.3%.

Three things are going on here.

1. Throughout the Eurozone benefits are substantial for the unemployed, providing the unemployed significant incentive to stay unemployed.

2. The Eurozone is now in the down phase of the business cycle. Thus, there is a natural tendency during this phase for unemployment to be high.

3. Government regulations, from minimum wage laws to regulations under which it is determined if and when a person can be fired, make it extremely difficult for firms to hire aggressively, if at all.

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