A disappointing jobs picture and no, we're not doing better than Europe

June 26, 2012: A Florida woman stands in line at a job fair in Detroit. (AP)

Americans faced another disappointing jobs picture today. Of course, we could go through the numbers again. With the working age population growing by 191,000 last month, 80,000 more jobs doesn’t even come close to absorbing all these new workers, let alone employing those who have long been out of work. And then there’s the most important number of all: for 41 months, the unemployment rate has been above 8 percent.  

But how does the US labor market compare to Europe or the rest of the world?  Earlier this week news reports may have made Americans feel a little better, if only by comparison. Reflecting the  philosophy that you should be thankful for what you have because things could always be worse, the headline in the Los Angeles Times read: “Think 8.2% unemployment is bad? It's a record 11.1% in Europe.”  An Associated Press article carried by Fox News and a host of other outlets made the same point.

The point has not been lost on President Obama, whose administration frequently references Europe as an explanation for our slow growth.  Last month, Obama noted: “slower growth in Europe means slower growth in American jobs.”

The problem with such a seemingly obvious comparison is that the US and most of Europe define unemployment quite differently. For example, in the United States you are only counted as unemployed if you are actively searching for work. In most of Europe you merely have to think about the idea and look at job advertisements from time to time.

Most of the drop in unemployment in the US unemployment rate has occurred because people have simply given up looking for work.  Many of those individuals would still be counted as unemployed in Europe.

So how do you make a comparison?  Most economists would argue that you should look at the percentage of the working age population that is working. There are many reasons why this percentage differs across countries, such as whether women stay home to raise children, but sudden changes in this number will provide a good idea of whether people are having a harder or easier time getting jobs.

Euro Stat provides detailed data on both employment and the number of working age people.  Similar numbers are available from the US Bureau of Labor statistics.  Since the beginning of 2009, the labor force participation rate in the US has fallen by 3 percent. In the 17 countries in the Euro area it has fallen by only half that (see figure).

If you look at the countries that have rejected a Keynesian-style economics stimulus with large spending increases and big deficits, the picture looks even better. Germany’s labor force participation rate has gone up by more than ours has fallen. Sweden, Poland, and Hungary have also all improved.   

Europe has lots of economic problems, but it is hard to see how we can blame them for our problems when our own job market is doing even worse.