Okay, These Are Really the 2 Scariest Charts in Europe

Don't look at these long-term and youth unemployment numbers if you like good news


Will we, at last, have recovery in our time? That's the question in Europe, where the once omnipresent threat of euro implosion has given way to a sense that things are finally getting better. This era of good feelings even has a portmanteau: crexit. Yes, crexit. As in, "crisis exit". It's true enough, but not nearly enough. In other words, the euro crisis is over, but the economic crisis remains.

This emerging Euro-triumphalism is mostly a story about European Central Bank (ECB) chief Mario Draghi and the Baltics. Draghi single-handedly ended the panic in sovereign debt markets when he promised to do "whatever it takes" to save the common currency, while the Baltics have shown there can be growth after austerity. But there's a "but". Draghi hasn't been able to get the ECB to do anything as the euro zone, including Germany, has fallen back into recession, and the Baltics, despite their recent growth spurts, are still far below their pre-crisis peaks due to the depths of their tight money and tight budget induced slumps. Europe's real economy is still, mostly, in really bad shape -- as you can see from these terrifying numbers that Jonathan Portes highlights from the latest European Commission report. These are the new scariest charts in Europe. At least for now.

Europe's definition of "long-term unemployment" is twice as depressing as our own. In the U.S., you have to be out of work and looking for a job for six months to count as long-term unemployed. In Europe, it's 12 months. But it's not just how they define long-term unemployment that's depressing -- it's their levels of it, too. As you can see in the chart below that compares long-term unemployment rates across Europe in 2007 and 2011 (the latest year for which we have figures), it's really a tale of two continents. The PIGS (Portugal, Ireland, Greece, and Spain) and Baltics are getting crucified on a cross of euros, euro-pegged currencies, and austerity. Everybody else is doing fine to meh.


Think about it this way. Roughly 1 out of 11 people in the workforce have been unemployed for a year or more in the worst-hit countries. That's even worse than the U.S. unemployment rate overall. Big economies like France and Italy are trending in the wrong direction, with growth reversing.

That brings us to our second scariest chart. The young have taken a big part, though certainly not all, of the jobless hit -- even in the continent's better-performing economies. The reality isn't quite as bad as the stories you may have heard about half of all Greek youths being out of work, since those numbers don't account for kids in school or training programs, but it's still bad enough. As you can see in the chart below, the percent of youths (defined as aged 15 to 24) who are neither working nor in school nor receiving some kind of training is still high enough to cause serious worry. Outside of Germany, it's edged up everywhere, if not outright spiked. It's not a good time to be young in Latvia. Or Ireland. Or Greece. Or Spain. Or Italy.


The toxic combination of careers deferred and discontinued for long periods can create what economists call "hysteresis" -- permanent damage to the economy. There's a stigma to being out of work for too long, or starting a career too late, that is difficult to overcome, short of an economic boom. Patting yourself on the back when so much remains to be done defines down success so far that failure becomes impossible -- and so will genuine success, in the future.

Europe's policymakers need some Rooseveltian, if not Churchillian, resolve in the face of mass unemployment. In other words, aggressive ECB bond-buying and fiscal expansion in the countries that can afford fiscal expansion (which will spillover into the countries that cannot). Anything less is just appeasement of inflation hawks and deficit scolds intent on winning a phony war against phantom opponents.