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Europe – Gloomy analysis on European economy from Kelly

07 August 2013

The European Union labour market has trended lower amid continued economic problems in the major economies and renewed efforts to curtail business costs through job layoffs, according to Kelly Services’ Employment Restructuring Report for Q2 2013.

The unemployment rate in the EU is currently 10.9% and in the Eurozone at 12.1%, with EU unemployment forecast to rise further during 2013 to above 11%. The varying impacts of austerity and local economic circumstances are reflected in the unemployment rates among member countries across the EU; with 5.4% in Germany, 7.2% in Denmark, 11% in France, 11.5% in Italy and Cyprus, and close to 27% in Greece and Spain.

Kelly predict that the tough economic conditions in the EU still have some way to run with no sign of a turnaround this year. Economic growth is being maintained in the US under its on-going monetary stimulus program, while the Japanese economy is emerging from a decade-long slumber. The global economy remains significantly unbalanced – the US is experiencing positive recovery while the EU is stuck in a rut. China’s output is strong but shows signs of softening, while Japan’s efforts to re-inflate remain a work-in-progress.

The labour market remained in a parlous state in the early part of 2013 as significant numbers of jobs were lost due to layoffs, and creation of new positions was weak. There were just over 100,000 announced job losses in the March quarter – a level that has been largely consistent over the past three quarters and about 15,000 more than a year earlier.

Job gains totalled slightly more than 34,000, leaving a net loss of some 66,000 positions, one of the widest gaps in recent years. The worrying sign is that job creation seems stuck in a declining trend, reflecting the lack of business confidence in any near-term recovery.

Putting this in perspective, new recruitment reached a peak of some 180,000 a quarter prior to the global economic crisis. Immediately following the worst of the economic recession, new recruitment slumped to just 20,000 a quarter. Now, some four years later, hiring activity is still just 34,000 in the March quarter.

Labour conditions in the EU are forecast to remain difficult for coming months, with no immediate prospects of a rebound in economic activity that would stimulate hiring. The major economies are facing a period of incremental emergence into positive growth, while wrestling with the process of structural adjustment and spending restraint.

The OECD is also predicting that the combined economies of Germany, France and Italy will grow at an annual rate of 1% in the second half of this year. A sobering outlook for the region’s three big economies, and even if realized, it still means subdued activity and higher unemployment.

There is more optimism in financial markets across the board, and business confidence, in the US in particular, is stronger, judging by forward indicators of investment intentions. Kelly Services’ predicts that the main stimulus to global economic activity for the immediate future will come from the US, China and possibly Japan. Europe will be sitting on the sidelines as this phase of the recovery unfolds.

To read the whole report, please click here

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