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Updated Thursday, November 12, 2009 10:04 am TWN, By David Blanchflower, Bloomberg

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Recovery looking like an 'L' without any growth in jobs

The reason for the difference is that the household survey has a broader scope because it includes the self-employed, unpaid family workers, agricultural workers, and private household workers, who are excluded by the establishment survey.

A shake-out of nannies, handymen, cleaners and gardeners may well have started. There isn't much evidence of any improvement here. The only sign of life other than in the health-care industry has been an increase in temporary-help services, which is a start. Construction and manufacturing continue to be hit hardest. Not much sign of recovery here.

There is also little sign that labor markets are improving in Europe other than from government stimulus. The social-welfare systems act in many countries as an automatic stabilizer preventing incomes from falling. Subsidies for part-time work in Germany and the Netherlands, for example, have helped to keep unemployment down. Even with a drop in output of about 5 percent from the peak, the Dutch have been remarkably successful in minimizing the impact on the labor market.

Currently their unemployment rate stands at 3.6 percent compared with an average for the 27 members of the European Union of 9.2 percent. But, there is little evidence in any EU country of significant net job creation in the private sector.

Cash-for-old-bangers programs are being withdrawn. In the UK, the temporary sales-tax cut will be reinstated at the end of this year. Moreover, firms in the euro area have yet to feel the full impact of a further currency appreciation.

Unemployment continues to rise in the big EU countries. The Organization for Economic Co-operation and Development is forecasting that the jobless rate will be more than 10 percent in Belgium, Finland, France, Germany, Hungary, Ireland, Italy, Poland, Portugal, Slovakia, Spain and Sweden in 2010.

Keynes's biographer, Lord Robert Skidelsky, has argued in his new book “Keynes: The Return of the Master” (Public Affairs, 2009) that the object of macroeconomic policy is to keep the economy in “quasi-boom” so people can live “wisely and agreeably and well.”

We certainly aren't there yet.

David Blanchflower, a former member of the Bank of England's Monetary Policy Committee, is professor of economics at Dartmouth College and the University of Stirling. The opinions expressed are his own.

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