July 15, 2012 at 1:19 PM ET
Unemployment in the European Union hit a record high in May. According to data provided by Eurostat, the unemployment rate in the 17 EU economies hit 11.1 percent, up from 10 percent the year before. There are now a quarter of a million more unemployed people in Europe than there were a year ago. During that period, the unemployment rate in those countries for those 25 and younger jumped from 20.5 percent to an unbelievable 22.6 percent. Meanwhile, in the United States, the youth unemployment actually fell from 17.2 percent to 16.1 percent.
Despite the improvement in the U.S., the worsening trend of unemployed young people highlights the severity of the issues facing many of Europe’s major economies. 24/7 Wall St. reviewed the 29 nations included in the report (most of which are in Europe, but they also include the U.S. and Japan) and identified the 10 nations with the highest unemployment rates among those 16 to 25.
With a few exceptions, most of these countries have been hit hardest by the recession. The so-called PIIGS countries of Portugal, Ireland, Italy, Greece and Spain -- infamous for their contribution to the European sovereign debt crisis -- are on the list. The remainder are not as infamous but nonetheless have been hit harder than the rest of the developed world.
Some of the countries with the highest youth unemployment rates -- which in several cases exceed 50 percent -- also have some of the highest overall unemployment rates as well. Spain, which tied with Greece for the highest youth unemployment rate (52.1 percent), also had the highest total unemployment rate of the 32 countries examined. All of the other countries on our list for which data is available had among the top 10 overall unemployment rates in May.
As evidence of the level of fiscal difficulty some of these governments are in, their sovereign credit ratings are among the worst in Europe. Nine of the 15 with the worst youth unemployment rates have a Baa3 rating or worse. Ireland and Portugal both have Ba ratings, while Greece is the only country in Europe with a C, or junk, rating. Countries with the lowest youth unemployment rates are almost without exception rated well by Moody’s. Only one of the 15 countries with the lowest rates has a worse rating than A1.
The countries with this severe unemployment also experienced the worst GDP contractions the European Union has seen in its brief history. In 2009, the gross domestic product of nearly every country in Europe (as well as Japan and the U.S.) fell. Latvia and Lithuania, which have two of the highest youth unemployment rates, had the highest single-year contractions in the EU in recent history, at 14.7 percent and 18 percent, respectively. In 2010, the most recent year of data, most of these economies bounced back, with the exception of five, which continued to contract. These five -- Lithuania, Greece, Croatia, Spain and Ireland -- are all on this list.
Using unemployment data published by Eurostat, which records data for sovereign European nations, the U.S. and Japan, 24/7 Wall St. identified 10 countries where young people cannot find a job. Eurostat defines unemployed persons as being aged 16 to 74, without work, able to start within two weeks, and having actively sought work in the past four weeks. Youth unemployment rates specify a narrower age range of 16 to 25. GDP data, including annual growth rates, come from the World Bank, which uses current U.S. dollars. 24/7 Wall St. also consulted Moody’s Investor Service’s sovereign credit ratings.
These are the countries where young people cannot find a job:
1. Spain (tie)
Since 2010, Spain has maintained the highest overall unemployment rate of all countries surveyed. In May 2012, the country’s youth unemployment rate caught up to that of Greece’s 52.1 percent, the highest rate in the study. Recent indicators suggest increasing economic weakness in Spain: the Markit Spain Manufacturing PMI, which tracks manufacturing growth, registered the lowest score in 37 months and the fifth-consecutive negative month. On June 13, rating agency Moody’s downgraded Spanish government debt from A3 to Baa3, and placed it on review for future downgrades. The effect of all this is a generation that, despite being well educated, has nowhere to work and lives with parents longer than ever.
1. Greece (tie)
As Europe’s sovereign debt crisis has unfolded, Greece was revealed as one of the countries with the worst problems. The country’s overall unemployment rate increased from 7.7 percent in 2008 to 21.9 percent in March 2012. Since December 2009, Moody’s has downgraded Greece’s sovereign credit rating seven times, from A1 to C. In 2009, central government debt reached 141.97 percent of GDP, while GDP fell by 3.25 percent -- before falling again by 3.52 percent in 2010. This has severely affected Greece’s youngest workers, 52.1 percent of whom were unemployed as of March. In Greece’s June national election, much of the youth vote flocked to SYRIZA, a leftist and anti-austerity party promising to deal with the youth unemployment.
Although unemployment rose considerably following the financial crisis, young Croatian workers have had a particularly difficult time. Since 2008, Croatia’s youth unemployment rate has nearly doubled from 21.9 percent in 2008 to 41.6 percent in May. The former Yugoslav nation’s GDP fell by 5.99 percent in 2009 and by 1.19 percent 2010, and problems still persist. In late 2011, the World Bank announced Croatia was likely to re-enter a recession, and early indications suggest the economy is once again contracting. This probably will exacerbate unemployment concerns for both the general population and young Croatians alike.
In recent years, Slovakia featured among the highest unemployment rates in all of the European Union. Yet, like many other European countries, unemployment in Slovakia has risen dramatically in recent years, reaching a post-financial crisis peak of 14.5 percent in 2010. Though the total unemployment rate declined shortly thereafter, the youth unemployment rate has continued to rise. In April, the youth unemployment rate jumped to 39.7 percent from 34.5 percent the month before. Slovakia’s new prime minister, Robert Fico, is reportedly considering constructing public housing facilities and providing subsidies in order to reduce youth unemployment.
Portugal’s unemployment rate has increased from 14.7 percent in January to 15.2 percent in May 2012. This trend is far more exacerbated among Portuguese youth. In 2000, youth unemployment rate in Portugal was just 10.5 percent, but has risen consistently since. This year, the country’s monthly youth unemployment rate has frequently exceeded 35 percent. Portugal has emerged as one of the areas of greatest concern in the European sovereign debt crisis, its credit rating from Moody’s having been downgraded five times in the past three years. In order to combat its rising youth unemployment, Portugal promised to reimburse companies for up to 90 percent of social security contributions made for workers between the ages of 16 and 30 if they had previously been unemployed for more than four months.