Daily Archives: December 5, 2011

The end of the eurozone crisis could now be in sight. One day, the euro verges on collapse. The next, a comprehensive solution is within reach. With sky-high Italian, Spanish and even French bond yields, we want a final answer: is the eurozone to be or not to be?

But what if it doesn’t sink or swim – what if it just bobs? Leaders of the 17 member states, the European Commission and Council will convene on Friday for what is set to be a climatic meeting. They will reaffirm their common goal: a united eurozone with prospects for sustainable growth. They are also likely to signal, more so than at any previous moment in this crisis, agreement on a systemic solution: a more robust economic framework to govern the euro.

But over time these bright signals will dim as the leaders’ battle over priority, sequence and scope. We’ll get a grand bargain in theory, but a reality that does little more than muddle through. The eurozone will not fragment in the next year – and it is unlikely that it ever will. But that does not mean the problems have been solved. Instead, expect continued uncertainty, volatility and macro headwinds as we wait for the yes or no answer that isn’t coming. Welcome to the most turbulent status quo in economic history. Continue reading »

News that the US unemployment rate has fallen 0.4 percentage points and that we have created 120,000 jobs is better tidings than of late, but we need to do much better: just to match population growth we need to create at least 150,000 jobs a month. For hiring to occur at a pace that would support recovery, we would need at least 500,000 more hires per month. Instead, payrolls today are more than 7m shy of where they were when the Great Recession began.

For American workers, these are the worst times since the depth of the Great Depression. The unemployment rate, the highest and most sustained in seven decades, improved last month primarily because more than 300,000 people left the labour force. And the situation is even grimmer than suggested by the dismal statistics, calculated from a base of only 60,000 families. Analysts have concluded that the combined unemployment and under-employment rate is slightly above a staggering 20 per cent of the labour force.

Who, among the contenders for the White House, has a remedy for this catastrophe? Clearly, this dysfunctional Congress offers no hope until after 2012. Yet we must reverse the decline in American education that has left workers less able to compete in the new world. Skills, not muscle, are the only reliable path to high-wage jobs, in an era when technology and globalisation allow companies to make new investments in regions where labour is cheap. Continue reading »