The Same Old Story?

The eurozone is experiencing some economic growth again. Data published the other day by Eurostat shows that eurozone GDP expanded by 1% in the second quarter of 2010 from the first quarter, and by a flattering 1.7% in comparison with the second quarter of 2009.

This is good news for a range of different reasons. But behind these figures loom a familiar problem: the eurozone's highest growth rate in more than three years comes with huge competitiveness gaps between stronger and weaker eurozone economies. The contrast between the impressive 2.2% expansion experienced by the German economy and - for example - the meagre 0.2% growth registered in Spain and Portugal is concerning, to say the least. Not to speak of the 1.5% contraction in Greek GDP over the same time period.

The recent sovereign debt crisis has shown that the single currency has failed to deliver on one of its major promises - boosting economic convergence and reducing gaps in competitiveness between eurozone members. Even when growing, one of the eurozone's deepest structural problems - its asymmetry - continues to smoulder beneath an aggregate surface.

As Ambrose Evans-Pritchard points out,

What in fact occurred is that Germany surged ahead with an undervalued currency, exporting Mercedes and BMWs to China. While Spain, Italy and Portugal are being left ever further behind in a split-level union with an overvalued currency. The data is cruelly double-edged.

Or, in the words of Carsten Brzeski of ING,

It's the same old story: Germany in a league of its own, carrying a few of its neighbours along; and beneath that, the laggards that are teetering on the brink of recession.

Wall St. Hiring in Anticipation of an Economic Recovery
THE NEW YORK TIMES: While much of the country remains fixated on the bleak employment picture, hiring is beginning to pick up in the place that led the economy into recession — Wall Street.

The shift underscores the remarkable recovery of the biggest banks and brokerage firms since Washington rescued them in the fall of 2008, and follows the huge rebound in profits for members of the New York Stock Exchange, which totaled $61.4 billion in 2009, the most ever. Since employment bottomed out in February, New York securities firms have added nearly 2,000 jobs, a trend that is also playing out nationwide at financial companies, commodity contract traders and investment firms.

Though the figures are small in comparison to overall Wall Street employment, executives, economists and headhunters say they expect the growth to pick up steam in the coming months.

“I think we’re seeing some hiring in anticipation of better times,” said Rae Rosen, a regional economist at the Federal Reserve Bank of New York. “Wall Street typically hires in anticipation of the recovery, and there is a sense that the economy has bottomed out and is slowly improving.”

The increase in hiring and cautious optimism stand in sharp contrast to the mood among workers in other fields, where jobs have been slow to return or are disappearing altogether. Since June 2008 the number of jobs has shrunk by nearly 14 percent in manufacturing and by 22 percent in construction, but only by 8.5 percent in the financial industry nationwide.

It is also the opposite of what is going in other highly paid, white-collar professions like law, where employment nationwide in June was the lowest since late 2001, according to data from the Bureau of Labor Statistics. Continue reading and comment >>> Nelson D. Schwartz | Saturday, July 10, 2010