In Linares, a small city in the southern region of Andalusia, Fernando Lara Cabrerizo says the benefits of Spain’s nascent economic turnaround are hard to find. “There is simply no work here,” he says. “Many families are like ours. We have no income, no aid, nothing.” A former construction worker, Lara, 39, has been jobless since 2008, when the collapse of a real estate bubble sent Spain into the first decline of a double-dip recession, Bloomberg Markets will report in its February 2013 issue. Unpaid bills are piling up, and Lara, his wife and two sons are surviving thanks to his mother, who shares her monthly 800 euro ($1,100) widow’s pension. Lara goes to charity groups for food.
The austerity imposed during the past two years in Spain, Portugal, Ireland and elsewhere aggravated European unemployment such that even as growth revives, many workers are being left behind, says Raymond Torres, director of the International Labor Organization’s research department in Geneva. “There’s been no job recovery in the euro zone as a whole,” he says. Policy makers should further relax fiscal restraints and try to make it easier for small enterprises to borrow, Torres says, providing a hint of topics to be discussed when the World Economic Forum convenes in Davos, Switzerland, on Jan. 22. In countries with weaker economies, small businesses are being shut out or priced out of most bank lending, Torres says, and that’s hurting job creation.
“Even if unemployment comes down by 1 or 2 percentage points, which would be a noticeable change, large numbers of people will still be out of work,” says Robert Wood, an economist at Berenberg Bank in London. “The normal man on the street won’t see the difference for quite some time.”
Labor market weakness extends well beyond the Continent, Torres says. “Globally, we are not creating enough jobs to get back to where we were before the financial crisis,” he says. The ILO estimates a net loss of about 32 million jobs worldwide since before the world fell into recession in 2008 and 2009. Torres’s research group will release new global jobs data just ahead of this year’s Davos meeting.
U.S. unemployment has dropped steadily for three years, to 7.0 percent in November, helping to provide U.S. Federal Reserve policy makers with enough confidence in the economy to begin tapering their monetary support. The decline, however, comes in part because more workers are giving up on finding work. Labor force participation has fallen even as growth has rebounded. Just 63 percent of Americans age 16 or older were either employed or looking for work as of November, down from about 66 percent in 2007. The participation rate is a number that Janet Yellen, who was poised to become Fed chairman in January, has identified as tempering her optimism about the U.S. job market.
For workers like Lara, reasons for optimism are simply missing. He spent about €2,000 on training for a special driver’s license. He got so desperate in November that he begged a trucking company to hire him and said they didn’t have to pay him until they were convinced he did good work. “You don’t even dare speak about pay anymore,” Lara says. “You’re so afraid they’ll just slam the door.”
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