In a couple of articles recently I have noted that Greece and Spain seem to be breaking the ranks of economic stagnation in Europe. While we wait for Eurostat to release third-quarter GDP data, let us take a look at what has happened on the job front in those two countries.
Let us, first of all, make one thing clear: a recovery as traditionally defined in the macroeconomics literature is not necessarily a recovery from a crisis of the kind Europe is now stuck in. This crisis is structural – permanent by default – and it will take a permanent change in the structure that perpetuates the crisis in order to end it. We may see an improvement in economic activity without such changes, but that improvement will not be strong enough to actually recover these economies.
A real recovery means a permanent elevation of economic activity above the two-percent growth threshold. Greece and Spain are far away from that threshold – even if they occasionally hit it in one quarter, it does not mean that they have recovered.
That said, there is one area where the Greek and Spanish economies are at least showing some resiliency: the job market. Analyzing Eurostat employment data we find quite a few interesting factoids.
Both Greece and Spain saw stronger job growth in Q2 2014 than the euro zone as a whole. In Greece the total number of employed persons grew by 1.58 percent over the previous quarter; in Spain the increase was 2.37 percent. For the 18-country euro area as a whole, job growth was a modest 1.21 percent.
In Q1 2014 total Greek employment increased by 0.11 percent, while Spain saw a 1.07-percent decline. Both numbers beat the euro zone where total employment fell by 1.57 percent over the previous quarter, Q4 2013.
Annually, the improvement is not quite as impressive. The Greek economy only grew total employment by 0.1 percent in Q2 2014 over Q2 2013. For Spain, the number was better at 1.1 percent, clearly beating the euro zone’s 0.3 percent. But both Greece and Spain lost jobs in the first quarter over same quarter previous year: employment was down 0.6 percent in Greece and 0.5 percent in Spain, while euro-zone employment expanded by 0.2 percent.
Nevertheless, looking back, the Greek economy has clearly been moving in the “right” direction for some time. Their annual quarter-over-quarter employment numbers have been improving for five quarters in a row now. This means four quarters of smaller and smaller decline, and again one quarter with an improvement year-to-year. The Spanish economy has seen a similar trend, though not quite as pronounced as in Greece.
The euro zone, by contrast, is not exhibiting any clear job-creation trend. Year to year, its quarterly employment numbers vary within a narrow band: from a decline of one percent to 0.4 percent growth. This verifies that the Greek and Spanish economies are bucking the trend, and this in turn calls for a deeper analysis of why that is happening. Furthermore, it means finding out whether or not it is realistic to expect the improvement trend to continue.
There is more good news for Greece and Spain: both countries have been able to turn around, or almost turn around, the employment situation for their young. In the age group 15-24, Greece has again seen five straight quarters of improving numbers: three quarters of a slowdown in job losses and two straight quarters, Q1 and Q1 2014, of actual growth in youth employment. For Spain, the trend is again not as pronounced – young Spaniards are still losing jobs – but at least situation is not worsening nearly as fast now as it did in 2012. For Q1 2014 Spanish youth employment fell by 4.7 percent; for Q2 2014 it fell by 1.2 percent. By contrast, the first two quarters of 2013 the decline was 14.7 and 12.4 percent, respectively.
In this area the euro zone is still very much in trouble. Consider these changes, quarterly year-over-year, to youth employment in the 18 euro-zone countries:
|Euro-18 youth employment change||-3.94%||-3.05%||-2.88%||-2.71%||-3.01%||-2.75%|
As soon as third-quarter GDP data is out we will take a close look at them. Then we will get a good opportunity to asks whether or not Greece and Spain are indeed recovering, or if their job improvement numbers are merely a reflection of the end of the harshest austerity measures known to free men (outside Sweden) since the 1930s.