Bite the Bullet or Extend & Pretend? Unemployment in Europe

45 million people have been furloughed in Germany, the UK, France, Italy, and Spain, but the “unemployment” rate barely budged because furloughs don’t count. Creating government-subsidized zombie companies & zombie jobs?

By Nick Corbishley, for WOLF STREET:

Unemployment in the EU has barely budged since the virus crisis began. In the first four months of the crisis, the official unemployment rate edged up from 6.5% in March, when many lockdowns began, to 7.1% in June, the last month on record. There’s one reason: Furloughed workers are not included in the unemployment stats (all charts via Trading Economics):

Most EU countries have adopted hugely ambitious job retention programs that have saved, at least temporarily, tens of millions of jobs. Each government pays companies, who in turn pay employees between 60% and 84% of their monthly wage. In some cases, the workers work fewer hours for less pay; in others, they don’t work at all. The workers take a hit to their income but their jobs remain intact, at least for the duration of the program, giving their employers time and financial breathing space to reinvent themselves for the new economic reality that is quickly taking shape.

In Germany, the UK, France, Italy, and Spain, a combined 45 million workers were registered in furlough programs at the end of May — compared to about 32 million Americans who are claiming unemployment benefits under state and federal programs. The initial duration of the programs differed significantly by country, from nine weeks in Italy to a year in Germany. But governments have begun to extend the duration of the programs.

The hope is that the economic fallout from the virus crisis will gradually dissipate, allowing many of the furloughed workers to return to their still-existent jobs, as happened in Germany during the Global Financial Crisis. Thanks to Berlin’s “Kurzarbeit” social insurance program, whereby employers reduce their employees’ working hours instead of laying them off, picking up government subsidies in the process, Germany experienced only a modest increase in unemployment, despite having suffered a 6% contraction in GDP.

But this time, the challenge is many orders of magnitude bigger and more complex. Back in 2009, just under 1.5 million workers in the country were furloughed — compared to approximately 10 million workers that applied for the program in March and April this year. In May, as the economy began to reopen, the number fell to 7.3 million, and then to 6.7 million in June.

“The decline is quite slow, and in some sectors short-time work is even increasing,” said Sebastian Link, a labor market expert at the IFO. “Furloughs among metal industry workers, for instance, jumped to 48% in June from 40% in May.”

Normally, Kurzarbeit is restricted to 12 months but it has been lengthened to 21 months since the coronavirus crisis began. Politicians across Europe have sought to do the same with their respective furlough programs.

Italy and Spain’s furlough programs were supposed to end in the coming weeks, but last week they were extended to the end of December. In both countries, public debt is already soaring — the result of three simultaneous processes: massive growth in government spending to counter the virus crisis, a dizzying slump in tax revenues, and a sharp decline in GDP. But if millions of jobs were destroyed this Autumn and hundreds of thousands of companies hit the wall, the tax revenues and GDP would shrink even faster while defaults on bank loans would soar.

Surely it would be better, so the thinking goes, to extend the program, and that way forestall an immediate crisis for households and consumer spending. As Spain’s Work Minister Yolanda Díaz told the Financial Times: “It would not make sense to undertake this gigantic, unprecedented effort in the Spanish economy [to preserve jobs] and then just let things fall away.”

Once Spain’s job retention program ends, workers will have to return to their jobs, at least for the same length of time that they were furloughed. But many revenue-starved companies are not yet ready to bring back workers and recommence paying their salaries for months on end. Most would collapse straight into bankruptcy, which would be a nightmare for a country whose unemployment rate is already 15.6% — higher than anywhere in Europe bar Greece — and where one million jobs have been destroyed since March, even with the furlough program.

In France, more workers have been furloughed than anywhere else, with the exception of Italy. By mid-May, 12.4 million people — 43% of the entire workforce — had applied for the government’s “temporary unemployment” program. Since then, the number of people on the program has fallen, though it’s not clear by how much. The government has pledged to maintain the “temporary” program for up to two years, while gradually reducing the provisions.

In the UK, 9.6 million jobs have been furloughed. Under the UK program, businesses can claim 80% of a staff member’s regular monthly salary, up to a maximum of £2,500. The money must be passed on to the employee and can also be topped up by the employer.

But as in the other countries, furloughed workers don’t count as unemployed, and the official unemployment rate has barely budged:

The government has already begun scaling back the program’s provisions and is scheduled to scrap the program altogether at the end of October. Unlike most of its European counterparts, the British government sees little sense in keeping workers in so-called “unproductive jobs” any longer than strictly necessary. The Bank of England appears to be of the same opinion.

“It’s been a very successful scheme, but [the Chancellor of Exchequer] is right to say we have to look forward now,” said Bank of England governor Andrew Bailey. “I don’t think we should be locking the economy down in a state that it pre-existed in.”

Bailey believes that some parts of the economy — notably those with “a high social consumption element”, where people work or consume in close quarters, such as in the hospitality sector — “will no longer be viable” in the post-lockdown reality. And it seems that both the government and the BoE accept that many of those jobs and some businesses that provide them will disappear.

With roughly one in four UK workers still furloughed — many in sectors with intense social interaction, such as food and accommodation — at a time that the number of job vacancies has collapsed to its lowest level since records began 20 years ago, it’s a massive gamble. The BoE believes that unemployment could almost double by the end of the year, to 7.5% from 3.9% today. That could prove to be optimistic. The OECD has warned that it’s likely to be closer to 11.7%, the highest level since 1984 when it reached 11.9%.

But the alternative — i.e., extending job retention programs indefinitely, in the hope that the economic outlook will change at some point — is also riddled with risks, including fraud. An internal audit conducted by the French government has revealed that 700 out of 25,000 companies investigated were suspected of engaging in fraud. That’s the equivalent of one out of every 36. In Italy, the problem is likely to be far worse. By some estimates, as much as 10% of furlough pay in Europe is lost to fraud.

An even bigger risk is that the job retention programs help to keep alive companies that were already on their last legs before the coronavirus crisis began. As the OECD recently cautioned, while the furlough schemes have helped to safeguard millions of jobs, at least temporarily, extending them further risks creating — at huge cost, especially in countries with limited fiscal space — a whole new generation of government-subsidized zombie companies and zombie jobs. When it comes to creating zombie companies, Europe is already in a league of its own. By Nick Corbishley, for WOLF STREET.

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  65 comments for “Bite the Bullet or Extend & Pretend? Unemployment in Europe

  1. MiTurn says:

    “But as in the other countries, furloughed workers don’t count as unemployed, and the official unemployment rate has barely budged.”

    With these nonproductive workers receiving various types of unemployment income, is this effectively a type of MMP?

    • 2banana says:

      In America in the 2008 timeframe, those that fell off the unemployment rolls after six months of benefits were also not counted.

      The unemployment rate was going down….because folks were simply not counted as “unemployed” when they exhausted their benefits.

      • Wisdom Seeker says:

        This is close but not quite right. In the USA, people without jobs who are actively looking for work do get counted as unemployed.

        Back in 2008-2010 what happened was people knew they weren’t going to find a job they liked, so they stopped looking for work. Then they didn’t get counted in the basic unemployment tally – but you could find them elsewhere in the statistics. The Employment-to-Population ratio was very helpful.

        But that no longer works. Both Europe and the USA have upped the ante by having people in special programs who remain technically “employed” even though they aren’t actually doing anything productive for their so-called jobs. So “employment” isn’t what it used to be and employment-to-population numbers are now garbage as a measure of economic health.

        And with governments now in print-and-spend anti-deflation mode, you can’t look at “income” numbers anymore either.

        In any case, to assess the genuine health of an economy, you always have to look behind the government’s numbers. They aren’t incentivized to provide an honest answer.

  2. Trinacria says:

    “45 million people have been furloughed in Germany, the UK, France, Italy, and Spain, but the “unemployment” rate barely budged because furloughs don’t count”

    Another perfect example of how “figures lie” and “liars figure”…..

    Yet another good one ” there is no inflation, or inflation is very very low”…
    correct…unless a person likes to eat and live indoors.

    • MiTurn says:

      Controlling the narrative…

    • John Taylor says:

      This is why I often argue that there is no point trying to compare economic data between different countries right now.

      The data points in the US and Europe are greatly skewed by their responses to COVID and the strange effects on economic measurements. Even trying to compare GDP is fuzzy as the assumptions in the calculations differ so widely.

      We are at the very early stages of the economic side of this crisis, and it’s hard to tell how we will all end up. The call for government action will be ongoing and strengthening, and the responses will greatly influence the structure of the post-pandemic world.

  3. 2banana says:

    Can kicking since 2008 (and before)

    The problem is the can gets bigger and heavier with every kick.

    Until the point where it breaks your leg.

  4. Jdog says:

    The old saying is nothing matters… until it does, and then it matters a lot. I I have a feeling in the next couple of years, a lot of things are going to start mattering a lot…..

    • Prairies says:

      Hard to believe that statement to be true. The can of 2008 was supposed to stop with an event like the current one yet… more debt is fine…

  5. Anthony A. says:

    I wonder how many government workers in these countries are unemployed or furloughed? I would suspect there can’t be much for them to do if everyone is sitting at home watching Netflix.

    • Satya Mardelli says:

      Government workers (ex federal workers) in the US are about to experience what unemployment feels like.

      State, county and municipalities are being crushed by the revenue drop-off. They will soon be forced to start layoffs as well. Tough times ahead for those feeding at the trough.

  6. DR DOOM says:

    Printing an economy is much more effortless and free of all the annoying little details of building an economy. There is a slight chance however no one will want to dig a mineral out of the ground and refine it and deliver it to you in your economy . The reason being is that the value added mineral is worth more in another economy. Central Banks solution for this pesky problem is they all collude so their is no advantage in another economy. Human Endeavor is not in the basket of core inflation components.But alas,there is Mother Earth and her basket of gold casting doubt and a shadow on this perversion and wagging her wise old finger as she salts and poisons the vile garden of fiat with gold. The ignorant little creatures realize that it is indestructible and rare. Soon an Economy starts to form and to function and to be regulated automatically by these qualities. Magic has been restored and all is well untill eventually the ignorant little creatures forgot what happened and The Dearth of Fiat returns to pillage and plunder once again.

    • topcat says:

      you may recall that we tried a gold standard, quite a few times in fact, and it never worked so we stopped. Why this obsession with the b worthless metal we call gold persists is beyond me.

      • Xabier says:

        The best and most cheerful use of gold is to play round with the gleaming coins by candlelight on a long winter evening, chuckling to oneself.

        Or jewellery on a pretty woman -but a pretty woman doesn’t really need that one bit.

        • Scott says:

          I like your comment.

        • Paulo says:

          Gold makes a nice dental crown. That would be at its most usefulness. As for storing wealth, when and how do you cash it in for something useful? At the farmer’s market, watch the clerk bite the coin and hand you some spuds. Fantasy land.

      • Jos Oskam says:

        @topcat
        you may recall that we tried fiat money systems quite a few times in history and they have all collapsed. Why this obsession with worthless pieces of paper posing as something of value still persists is beyond me.

      • Phillip says:

        When did it stop working? When governments wanted to inflate the currency to pay for great big wars. If that is what you mean by failure, then we can go back onto a gold standard, if we stop the stupid wars.

        • Gavin Wilkinson says:

          While war is a trigger that has destroyed fiat, many hyperinflation, such as Zimbabwe and Venezuela have occured outside of war. Gold has unique properties to retain value for people that are not valued by their oppressors.

  7. DawnsEarlyLight says:

    How long can you chase the ‘rabbit’, when there is no apparent ‘finish line’?

  8. lenert says:

    Keep reading that a bunch of these businesses were marginal anyway and Covid is just hastening their demise as if there was some alternative plan to deal with further job losses even in the absence of a pandemic.

    • MiTurn says:

      Ienert,

      Good point. We’re seeing a fundamental change in the economy, albeit slowly.

      I have a fried whose bro-in-law works at a ‘robotic’ Amazon warehouse as a techical design engineer (or something like that) and he described how the Amazon warehouses are increasingly automated and no longer requiring human workers. In fact, the level of human interaction at this particular warehouse is such that even a trained monkey could do some of the work — such are the final aspects that are still not yet automated and still require some inputs from the naked apes.

      Fascinating. Technology is increasingly making humans redundant.

      • Anthony A. says:

        At least in warehouse operations. There are lots of jobs where repetitive robot skill is not applicable.

      • topcat says:

        only works up to a point. Toyota has recently got rid of many of its robot welding stations and gone back to humans, Musk found out that he couldn’t automate car manufacture the hard way, Apple gave up their huge R&D project for automating iphone production and hence foxcon. etc etc. Robots are very primitive and actuator technology is no where near good enough or cheap enough to replace human hands.

        • Paulo says:

          Tax the robots as a substitute for income tax. Then, workers might some day actually get that leisure time that has been promised for generations. All I have seen with tech changes is job loss and stagnant wages.

    • Old School says:

      I used to think people that opened all the small businesses which are kind of personal service businesses were stupid, but a lot changed since I was young.

      The most common family situation in NC thirty years ago was wife was a teacher and the husband worked at a manufacturing facility. Now I kind of admire their creativity to come up with a service that people really don’t need. If you aren’t technical, financial, legal or medical how else are you going to try to make a living with manufacturing employment down I think to around 15% of employment.

      The thing about manufacturing is you can automate the process and run tend of thousands through in an hour. Services are usually one person at a time so it’s harder to gross but so much revenue per hour

  9. italyOK says:

    In Italy 90% of all people shutdown because of the virus starting in Jan 2020, all hotels closed, maids, cooks, home servants, B&B’s the entire ‘service economy’ was gone, and Italy was already a mess.

    How can they say that unemployment is low single digits when +80% of everybody I know doesn’t have work, sure there is ‘free money’, while it lasts.

    The only jobs I see in the ’employment figures’ are those in gov or big-corporations, who have been laid-off, which isn’t many, as most people in gov or corp jobs just work from home more, or were given an exemption during the lockdown.

    Permanent disconnect from reality. I figure a new ‘dark age’, more like Brazil in Europe in the coming years. Roving gangs, and police will scavenge anything of value.

    On the good note here in Italy at least my family, “We don’t care”, we grow our own food, have our own wine & grapes, bake our own bread. The tourists are gone, but the cash-flow isn’t really that much different, before when we had high-cash flow, as you all might know here the gov takes about 90%, so its the old story when you ain’t making any money, there is nothing to tax, gov hasn’t yet figured how to tax home grown food. I suspect that’s why the ‘chinese seed’ thing is going on in USA, the first thing in COVID is they tried to ban seeds, seems that the PTB doesn’t want people to grow their own food.

    • Engin-ear says:

      Deep thoughts, thanks for sharing.

      The only weak point of “grow your food yourself” is that you can’t grow euros to pay the real estate taxes.

      Yes you can sell the surplus, but will it be enough?

      • Xabier says:

        Historically governments in extreme crisis do tax people into the ground without compunction, above all those who are not rich in any way, with just a modest property and some land.

        They are the first to go in fact, even in a revolution ‘for The People. ‘

      • Anthony says:

        Real Estate Taxes in most of Europe is low. Here in the UK the highest tax is around the $5000 level…..

        • Engin-ear says:

          “During the Second World War, the top individual tax rate rose to 94 percent and remained at 91 percent for nearly two decades—until 1964. ”

          — expert, Eric Toder, Institute Fellow and Codirector, Tax Policy Center

          Our taxes may stay low until the “War On Covid” is officially declared.

    • Xabier says:

      Probably facing a Latin American kind of social pyramid.

      First the tidal wave of true, persistent mass unemployment , reminiscent of the 1920’s and 30’s in Europe, hits

      Then the political effects start to manifest. Redistribution and anti-immigration will become even more pressing topics, generating violent emotion. Intense class and generational divisions.

      Socially? More and nastier everyday crime, fraud, house invasions, stabbings and shootings, much, much higher levels of drug addiction among the hopeless young – those who were thrown out of work in the ‘no longer viable sectors’ and those who saw the lives of their parents destroyed. They will never form decent law abiding families themselves.

      Psychologically? An all pervasive and corrosive cynicism, and a steep decline in general morality.

      • RightNYer says:

        Xabier, I think that’s coming to the United States too. The reason right now for the apparently healthy stock and real estate markets is that the white collar jobs were largely spared (for now) by the COVID recession. So everyone who still has their jobs thinks all is hunky dory. But obviously, a contraction of entire industries down to almost nothing (retail, hospitality, entertainment, travel) will have massive ripple effects on EVERY industry, including the big tech which people right now have deluded themselves into thinking is immune.

        A lot of the crazed real estate action I’m seeing in the suburbs of NYC, DC, Chicago, and so forth is reminiscent to me of 2007. We have people buying without seeing houses, we have bidding wars, and all sorts of other things emblematic of a bubble.

        The federal government has been able to prop up consumption so that the rest of the economy doesn’t fall, so far. But if the plan was to keep it propped for a few months while COVID went away and everything recovered on its own, the plan has failed miserably. Congress has painted itself into a corner. It either continues these subsidies indefinitely or it lets everything crash, and this time, it WILL have ripple effects on the rest of the economy.

    • Paulo says:

      ItalyOK,

      We do the same where I live on Vancouver Island. We have potatoes enough for the year, bake our own bread, can salmon, and have enough frozen salmon and vegetables set aside for another year. Grocery store supplies are obviously still available and we shop when we feel like it, but if it all falls to pieces we won’t starve, nor will our friends and neighbours. Heating is set for the next 5 years, cut, split, and stacked in sheds. We just live this way and always have long before Covid.

      Around here the logging industry is booming. Booming. They are running two shifts under lights to process the wood at the local dryland sort, and the ‘Company’ will log 2 million cubic meters this year from the region. People still buy lumber, especially towards the end of hurricane season. :-) No one misses the tourists or cruise ships except for the resort and hotel owners. Local travelers have filled the campground void with staycations. More people are cooking and eating at home due to restaurants shutting down which is a pretty normal lifestyle, imho. The dining out frenzy and rampant air travel these past 20 years is an aberration as far as I’m concerned. As for jobs, trades are working flat out for decent wages. In past recessions I always found work as a carpenter. (My first trade). Always. I used to fly for a living but when the jobs grew scarce in downturns I would pick up the tools. I know a senior rotary pilot who has left aviation this year and gone back falling trees at $600 per day for a 6.5 hour day. No brainer.

      My son earns 200K per year as an industrial electrician working 2 weeks on and 2 off for an energy maint company. He has a contracting business on the side. There is lots of work in Canada for trades. I’m retired and could work full time building new and doing renovations.

      The property taxes on my homesite and property (3 different parcels) works out to $2,000 per year. That would be for 17 acres, zoned residential, but in a rural area. Our provincial Govt encourages people to grow their own food, protects all farm land from development, and encourages local resiliency. There is no way to tax home grown food.

      I tried farming for profit (Christmas trees) and it wasn’t worth the effort. I used to raise sheep to cover feed costs and just produce a supply of lamb for the family. Predators kept getting my sheep so quit that. Fish is fail safe, and I sell enough eggs to my neighbour to cover all feed costs and have free eggs. You can’t even raise meat birds at home for the same cost as industrial producers and I had my own plucking machine. (built it). Gardening and egg production is the only cost effective scenario around here for a small family operation.

      If the virus is controlled life is pretty normal and employment increases. The infection rate in the US is 15X higher per capita than the EU. It is 25X higher per capita than Canada. These stats are available on CNN. Pull together as a country and the burdens are shared. If rich 1st World countries can’t afford to help out their populations during a pandemic then they deserve an uprising. There’s always money for tax breaks for the rich and for war. They can carry workers for awhile, at the point of a gun if necessary.

      regards

  10. Cobalt Programmer says:

    People who have jobs now must be thankful and fully involved in it. But the threat of job loss is there. Not a good time to negotiate a salary increase or a well-deserved promotion (huh…). There may be a tough time at work because, lot of them were laid off or working from home and you are the only one at office. Lot of married women will be taking care of the kids. Even the WFH, online work got a lag period in learning. The balance of family and office will be broken (Cabin fever–Married ones do not want each other to be near for a long period of time). For hardworking immigrants, the additional visa problems and the uncertainty adds insult to the injury.

    • Ellie says:

      I am currently negotiating a promotion. The company is running things as close to normal as possible and continue to be as profitable as before COVID; but then we were mostly remote for years before COVID, so no struggles adjusting business (and apparently no loss of business either).

      • sunny129 says:

        Any one doing the job REMOTELY can be replaced by some one who is willing to the same ‘quality’ for lot less! NOT talking about old globalization – labor arbtrage but right here!

        Even the most technical skill level jobs will be at risk, as the time passes – darwanian process!

        • Ellie says:

          Sunny, I am okay with that as every few years one has to reorient him/herself anyway.
          Working remotely in an environment that has and is continuing to move people’s career along, even though we are remote, is to be commended. My original point wasn’t so much the remote work (before COVID we had some personal meetings w/clients) as it was relating the fact that there are still promotions going on. I am just trying to get one of those;-)

  11. Prof. Emeritus says:

    Germany’s Kurzarbeit does not counts as true furlough as in the Anglo-Saxon world though, nor the nations copying the same scheme. These people usually stay productive in a reduced timeframe.

  12. EJ says:

    Europe (and the US) need job retraining on an unprecedented scale.

    Authorities can beat around the bush all they want… fact is, many jobs are busywork that should be automated or trashed, while others were utterly obliterated by COVID. No amount of shuffling wages and hours around is going to change that. I think the EU needs to dump a eye-watering fortune into adult back-to-school programs (which, coincidentally, would help struggling education institutions and give unemployed something to do), so all those workers can design or operate the tech that replaced their jobs.

    The US should do that too, but theres a snowball’s chance in hell of that happening in the current political climate. I half expect public university funding to be banned by the end of the year :/

    • Engin-ear says:

      I wish the training were a solution…

      2020 spring world lockdowns brought us the notion of “essential economy”, which seems to be about 30% of current GDP.

      What is the other part? “Entertainment economy”?

      You can have it for free on your smartphone.

      I have little understanding of what kind of training will help us.

      “How to become a Youtube rockstar”?
      “How to be happy staying poor”?
      “How to grow your own food”?

      The biggest problem is that you may find the training for all you wish in Internet for free.

      Pouring big money into “training” … will transfer this money to training providers.

      • Erle says:

        You have that correct. Just what we need is government employees teaching on how to be productive. If one does not avail themselves of the huuuge amount of legitimate training and schooling that is available, do not expect me to pay to spoon feed you by way of yet another gombit program.
        There are book sales around where one can get texts that are still up to date in all sorts of subjects. They are as costly as 75 cents.

      • EJ says:

        How about “how to program” or “how to market online” or even “how to use a laptop?” Or, God forbid, we push ECE, material science, optics etc to bring some production and research back to the US?

        Basic tech illiteracy is still way too high. And despite the popular belief, theres more to the tech industry than twerking on social media or slaving away in an Asian sweatshop, though I get that not everyone can become an engineer.

        • Engin-ear says:

          For everything you mention, there are high quality educational videos on Youtube for free (ads excluding), mostly done by enthusiasts seeking celebrity or being authentic altruists or just for fun.

          The biggest barrier for education is the basic laziness and low real return on academic investment.

          For most of modern day jobs, you need basic reading, writing and socializing skills acquired at school.

          Everything else you may learn using Wikipedia under condition you have curiosity and determination.

          As for future, either we’ll find new sources of energy and we’ll automate everything and will live like kings, or we’ll all become peasants growing our own food and waiting for sunny days to recharge our iphones XX.

        • EJ says:

          Perhaps, but the role of schools is largely disciplinary, especially at the lower levels. Grades, attendance, degrees and such are all just constructs to beat back basic human laziness.

          Theres also something to be said for having human mentors and peers when struggling.

      • Paulo says:

        Plumbing, electrical, carpentry, electronics, controls and instrumentation, Hd tech…..etc. You can even wear a white shirt if you choose, just bring lunch in a bucket and be productive.

        There is nothing more rewarding than seeing a customer using something you built.

        My son is an electrician on heavy mining equipment. He uses a computer for diagnostics, or specialty meters. He also assembles the electrical systems when they build new trucks and shovels on mine sites as the machines are too big to transport from a factory. He’s 36 and has been doing it for years….making big bucks.

        Sometimes consultant mechanics and engineers are flown in from Germany when there are tricky problems that are new to the crew. These guys do pretty well for pay. Very well.

        How many people can do their own plumbing? Wiring? Any repairs, whatsoever? Most people are helpless. Trades pay well. Very well, unless you are in a distressed and hopeless area. My neighbour was a Marconi tech installing/fixing radios and radar in ships all over the World. These guys make bucks.

    • Old School says:

      Read a good article related to the above. It had lot of data. Basically money printing has caused a lot of debt which has lowered real savings which has lowered real capital investment which has lowered real productivity which has lowered real growth.

      • sunny129 says:

        @ Old school

        For the last four decades, every time the Fed has taken action trying to achieve their goals of “full employment and stable prices,” it has led to an economic slowdown, or worse.

        The relevance of debt growth versus economic growth is all too evident. Over the last decade, it has taken an ever-increasing amount of debt to generate $1 of economic growth

        In other words, without debt, there has been no organic economic growth.

        While the Fed has been diligently working on its next program to achieve the long-elusive 2% inflation target, it will result in the same outcome as the last decade.

        The problem is the debt, and you can’t solve a debt problem with more debt.
        h/t ria

    • Ellie says:

      Germany, in particular, already does job retraining all the time, even for people who have no shot at ever working again. It’s already baked into their system, if you will.
      My mom went through this a few years ago. First Kurzarbeit, then unemployment, then sent to some training (Business English, Computer, etc.), then back on unemployment, then some other sort of program, just to stretch her out to get as close to retirement as possible without descending into welfare. And she does not have an aptitude for either business, English, or computers but it didn’t matter because no one would hire a 55+ year old lady anyway. I have a few other relatives who also went through this, just different training courses.

      Do this on a grand scale and think of how the unemployment numbers become distorted.

      Yes, adult-education teachers are now employed, but to what end?

      • EJ says:

        Hmmm, thats interesting. I guess retraining just burns money and time if no one will hire trainees for those skills, and employing educators is certainly not the goal.

        Its also very frustrating. Surely your mom’s (for instance) computer/english skills could raise her productivity beyond unskilled labor, but it doesn’t matter if no one will hire her for it. Its a glaring economic inefficiency, a huge one in 2020, and that really bothers me :/

        • Ellie says:

          EJ,
          and you can’t say no to any training offered because then your benefits are cut, so folks just go along to keep money coming in.

      • Paulo says:

        Germany has the best technical training in the World by far. In Germany a tradesman or technician is a highly respected position in society.

    • sunny129 says:

      @ EJ

      ‘need job retraining – adult back-to-school programs’

      ?
      Cannot stop the coming job losses for the next decade or two with AI & Robotocs programs ALREAD replacing many ‘repetitive’ manufacturing jobs and even some white collar jobs are at risk!

      Why worry about absebtee, sick leave, covid 19 or similar, health care, workman’s compensation, suits related sex discrimination, sex harassment, ageism, unemployment tax and retirement costs!?

      Robots just need routine maintenance after the initial capital outlay! Future is already here!

  13. GotCollateral says:

    I’ll take Lipstick On A Piig(s) for 100… :P

  14. Underground says:

    Never forget it is never people who are redundant: jobs are.

  15. Putin on the Ritz says:

    “We can ignore reality, but we cannot ignore the consequences of ignoring reality.”

    ― Ayn Rand

    Covid is our Chernobyl moment. A few years after Chernobyl, the Soviet Union had to face reality.

  16. Mike says:

    It is called social democracy, a just system that helps every member of the society where people can live with dignity and they do not have to feel as disposable items. Yes, the EU provides aid to corporations IN EXCHANGE for keeping EU citizens on payroll and as a result of that they will rebound faster than US, just look at weakening US Dollars and the strengthening Euro. The US screwed this up big time, unfortunately, and now as a result of that are turning into some low end central American country. Most migrants are trying to get into the EU not the USA these days and there is a good reason for that.

  17. sunny129 says:

    Another ‘ Extend & pretend’ show in progress!
    Nothing here. Move on!

  18. realist says:

    Mr. Corbishley, thank you for a very good article that lays out the sad facts. I wish I could entertain some reaction to the facts other than horror.

  19. joe2 says:

    “Bailey believes that some parts of the economy — notably those with “a high social consumption element”, where people work or consume in close quarters, such as in the hospitality sector — “will no longer be viable” in the post-lockdown reality. And it seems that both the government and the BoE accept that many of those jobs and some businesses that provide them will disappear.”
    Miss seeing and being with people? Get you sex robot now before it becomes a “health aid” and the prices go through the roof due to corporate takeovers by big pharma.

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