Global Economy Still at Risk, Just Look at the Jobs Picture

By George Leong for Investment Contrarians

Consistent jobs growth remains an issue here in the U.S.

We also know that the lack of jobs is a worldwide problem that is only made worse by the world’s growing population and the stalling global economy.

The reasoning behind this worldwide jobs problem is simple.

Jobs are created when the economy expands, which drives the need for more workers. Of course, modern technology, industrial efficiencies, and the increased use of robots all combine to pressure jobs growth, and I expect this pressure to continue.

Just take a look at China. In that country’s vast manufacturing landscape, the key driver is the masses of unskilled workers who are required to toil at their workstations for 12 hours or more each day.

China’s companies can make use of robotics to help in many of the assembly areas, but it seems that these companies use human labor instead—perhaps because creating jobs for the masses is a goal of communist China.

According to the International Monetary Fund (IMF), China’s unemployment rate has managed to hold pretty steady at just over four percent since 2003. In 2012, the unemployment rate was 4.1%, the same as in 2010 and 2011, and the estimate for 2013. (Source: “China: Unemployment rate from 2003 to 2013,” Statista web site, last accessed April 23, 2013.)

But in the more industrialized countries, like the United States and countries in Europe, there has been a move toward modern industrial techniques and the use of robotics.

And while America struggles to create jobs growth, the situation is extremely dismal in Europe.

As I commented in these pages a few weeks back, the jobs growth situation in Europe is horrible, with the official unemployment rate hovering at well over 20% in many countries (and the unofficial rate likely sitting much higher).

Greece is a mess, with hordes of jobless workers, and it will likely get worse, given the country’s austerity program.

Spain had an unemployment rate of more than 26% at the end of 2012. The Spanish youth have it really bad, with the unemployment rate for 16- to 24-year-olds at a staggering 55%. (Source: Global Post, “Spain’s unemployment rate hits record 5 million in February,VOXXI March 4, 2013, last accessed April 23, 2013.)

The problem is that without strong economic renewal, which we have yet to see, jobs growth will continue to be problematic in many of the world’s industrial regions.

The IMF acknowledges the problem of jobs growth. In its discussion at the 2013 Spring Meetings, the IMF stressed the need to drive economic growth and jobs. (Source: “IMF Outlines Steps to Energize Global Recovery,” International Monetary Fund web site, April 20, 2103.)

So, when you hear about the global recovery, especially in reference to the eurozone and Europe, take a look at the jobs growth, and you will realize there are still major problems to be resolved.

Don’t simply jump back into European investments thinking the worst is over, because it is not—the lack of jobs growth globally indicates the worst is still with us.

This Article Global Economy Still at Risk, Just Look at the Jobs Picture was originally published at Investment Contrarians