Friday, January 8, 2010

Unemployment over the business cycle in the U.S. and Europe

Time will tell whether October's 10.1% unemployment rate in the U.S. was the high water mark or not, but it appears that the unemployment rate in Europe may only be beginning its ascent. While today's measure of December unemployment in the U.S. remained at 10.0%, the Euro-area unemployment rate hit 10.0%, the highest in the decade.

The differences are presumably due to labor market regulations and practices. A Times article reports economists' pointing to French and German plans to restrict worker hours in order to avoid layoffs.

Is it better to spread the pain of recessions more broadly, even if it means delaying (or at worst, prolonging) recovery in the labor market?