Reuters blog archive
from The Edgy Optimist:
There’s no doubting that worldwide, kids are out of work. In the United States alone, the unemployment rate for 15 to 24-year-olds is about 16 percent, nearly twice the national average. In parts of Europe, the figures are much worse, with a whopping 56 percent youth unemployment rate in Spain alone -- representing about 900,000 people.
But do these high numbers represent a global labor market crisis that imperils future growth, as the headlines warn? Maybe not. Maybe instead, they're evidence of a generation of college graduates determined not to settle, which bodes well for our future.
To understand why, it’s worth a quick detour through history. Until the early 20th century, there was no clear concept of “unemployment.” Classical economics emerged in the late 19th century at a time when there was an ample supply of labor to feed the relentless maw of industrial production in both Europe and America. Because there was no social safety net, people worked in order to generate essentials such as food, clothing and shelter. You had to work to survive, and there was always work to be done and need for bodies to do it. Many believed that “unemployment” was only an option for vagrants, who were in turn viewed as immoral.
from Global Investing:
Four years into the stock market party fueled by a punch bowl overflowing with trillions of dollars of central bank liquidity, you'd think a hangover might be looming.
But almost all of the fund managers attending the London leg of the Reuters Global Investment Summit this week - with some $4 trillion of assets under management - say the party will continue into 2014.
It’s euro zone third quarter GDP day and Germany and France are already out of the traps with the latter’s economy contracting by 0.1 percent, snuffing out a 0.5 percent rebound in the second quarter. Growth of 0.1 percent was forecast, not just by bank economists but by the Bank of France too.
Germany failed to match its strong 0.7 percent growth in the second quarter, but expanding by 0.3 percent – in line with forecasts - it is clearly in much better shape.
By Swaha Pattanaik
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The Bank of England made a rod for its own back in August when it first linked the outlook for monetary policy with the fortunes of the labour market. It now admits it was too pessimistic about how quickly unemployment would fall. However, the central bank seems no keener to raise interest rates than it was then. Governor Mark Carney is trying to nuance the message. But he might do better just to simplify it.
Barring a last minute change of heart, the European Commission will launch an investigation into whether Germany’s giant trade surplus is fuelling economic imbalances, a charge laid squarely by the U.S. Treasury but vehemently rejected by Berlin.
This complaint has long been levelled at Germany (and China) at a G20 level and now within the euro zone too. Italian Prime Minister Enrico Letta urged Berlin this week to do more to boost growth.
The Bank of France's monthly report forecasts growth of 0.4 percent in the last three months of the year, up from an anaemic 0.1 percent in the third quarter. That still makes for a fairly doleful 2013 as a whole.
France is zooming up the euro zone’s worry list, largely because of its timid approach to labour and pension reforms. Spain has been much more aggressive and is seeing the benefits in terms of rising exports (and, admittedly, sky-high unemployment). So too has Portugal.
from Nicholas Wapshott:
There have been a lot of sighs of relief in Europe lately, where countries like Britain and Spain, long in recession, have finally started to grow. Not by much, nor for long. But such is the political imperative to suggest that all the misery of fiscally tight economic policies was worth the pain that there are tentative claims the worst is now over and, ipso facto, austerity worked.
Hold on a minute. Growth is good. Growth is what allows countries to pay down their national debt by increasing economic activity, putting the unemployed to work and making people prosperous enough to pay taxes. But gross domestic product growth alone is not enough to provide adequate sustained prosperity if it does not also lead to significant job growth.
Italy will auction up to 6 billion euros of five- and 10-year bonds after two earlier sales this week saw two-year and six-month yields drop to the lowest level in six months. Don’t be lulled into thinking all is well.
After Silvio Berlusconi’s failure to pull down the government, Prime Minister Enrico Letta has some time to push through economic reforms, cut taxes and spending. But already the politics look difficult and the central bank said yesterday that government forecasts for 1.1 percent growth next year and falling borrowing costs were overly optimistic.
A two-day EU summit kicks off in Brussels hamstrung by the lack of a German government.
Officials in Berlin say they want to reach a common position on a mechanism for restructuring or winding up failing banks by the end of the year but with an entire policy slate to be thrashed out and the centre-left SPD saying the aim is to form a new German administration with Angela Merkel’s CDU by Christmas, time is very tight.
The Bank of England’s decision to peg any move in interest rates to the downward progress of unemployment has invested the monthly figures, due today, with huge importance.
In a nutshell, markets don’t believe the jobless rate will take the best part of three years to fall from 7.7 percent to below 7.0, the point at which the Bank said it could consider raising rates from a record low 0.5 percent. For what it’s worth, the consensus forecast is for the rate to be unbudged at 7.7 in August.