Growth Tremors in Europe

Once more, in the news this morning, gloom and doom (as if we didn’t have enough of that already). The reason for this is that, in Europe, German (-0.6%), French (-0.1), and Italian (-0.8) Gross Domestic Product numbers came in negative for the second quarter compared with the first. The change in Europe’s total GDP was a positive 0.2 percent, but in our day and age positive growth at such low levels is viewed with alarm.

In our times nobody asks how much growth is necessary in our economies. In other words: What is the underlying measure? The underlying measure, it seems to me, is population growth. Whenever GDP growth exceeds population growth—and the more it does so the more true this is—we are engaged in unnecessary overconsumption.

Just to check this out, I looked to see where European population growth now stands. “Now” in this context is 2012, the last year for which UN statistics are available. That year the growth stood at roughly 0.18 or 0.19 (I’m taking data from a graph). Therefore the Q2 GDP growth in Europe is just a shade higher than actual population growth. The two, in other words, are in equilibrium. I am showing the population graphic below; I found it here; the data for it come from this UN report (link).

Sooner or later, and all over the world, we will have to adjust to GDP growth rates that match population growth rates pretty closely rather than diverging sharply—as in the graphic that I’m reproducing from a previous post:

Why? Because the Age of Oil is drawing to a close and we shall be obliged to adjust to the “new normal” eventually. This reasonable projection is simply never seriously pondered by our media which are still convinced that nothing is changing at the basic levels of the world economy. But things are changing. Europe may be ahead of its time and Angela Merkel wise rather than foolhardy in insisting on austerity.

Employment Update: July 2014

Since the last Employment Update that I published, for April 2014, three others have been issued by the Bureau of Labor Statistics (BLS), the last one, for July, here. I’ve been diverted from blogging by various changes in our lives, most notable buying and selling houses and, for us, a big move.

In that period, wouldn’t you know it, in May 2014, to be exact, the U.S. Economy finally erased the job losses produced by the Great Recession in 2008 and 2009. That job loss was 8.663 million jobs, measured as follows:

In December 2007, total employment stood at 138.35 million. In December 2009, it had dropped to 129.687 million. The difference between these dates is the loss. In May 2014, employment finally reached 138.497 million, therefore just barely exceeding the previous high at the end of 2007. By July of this year, that last Employment Report from the BLS, total employment was 139.004 million, therefore still growing in the right direction.

An updated chart, showing the economy’s performance since December 2007, follows. Following it is a chart showing total losses and gains, actual for 2007-2013 and an annualized projections for 2014.

Now that we have recovered the jobs lost in the Great Recession, another process is beginning. It is the creation of new jobs necessary to meet the needs of population increase—to accommodate the growth of the labor force. As I have shown before (here), in the 2010-2020 period, we need to add 87,300 jobs every month just to keep up with the population. If we take the period 2008-2013, plus the first four months in 2014 (when we were still just replacing lost jobs), we were building a deficit. The period described is 76 months. The deficit, therefore was 6.635 million jobs as April 2014 ended.

Since April, we have had job gains in excess of 87,300 every month. In May, with job gains of 229,000, 141,700 jobs (229-87.3) could be counted against call it the accumulated Growth Deficit of 6.6 million jobs. The economy is now in sunnier climes. Therefore in just the May to July period we’ve already managed to recover 7.1 percent of that deficit—rather than adding yet another 87,300 jobs to it—as in the last 76 months. A graphic shows this change.

Good news, by and large.