Europe's Unemployment Rises for 5th Month, Narrows Gap with U.S.

Unemployment rose for a fifth straight month in Europe in August, narrowing the gap with the U.S.

The continued rise in unemployment across the continent is feeding concerns that extensive government support programs won’t be able keep many businesses hit by coronavirus restrictions afloat forever.

It may also have salience in the U.S. presidential election. Democrat nominee Joe Biden has repeatedly claimed that the U.S. economy has suffered due to what Democrats say was mismanagement of the pandemic response, with lower unemployment rates in Europe serving as evidence for that argument.

The U.S. put in place the Paycheck Protection Program to keep workers attached to jobs at small businesses but did little to prevent layoffs in larger businesses, opting to enhance unemployment benefits to support income and spending. In Europe, many governments subsidized wages and banned layoffs to keep workers officially employed, artificially depressing the unemployment rate. The result was that the U.S. rate soared as high as 14.7 percent in April, while the Eurozone’s unemployment rate remained below eight percent until August.

The U.S. jobless rate fell to 8.4 in August and is expected to fall to 8.2 percent when the government releases its monthly report on the employment situation.

The jobless rate increased to 8.1 percent in the 19 countries that use the euro currency, up from 7.9 percent in July, official statistics showed Thursday. Some 13.2 million people were unemployed and the number of those out of work rose by 251,000.

Economists expect a further rise in coming months as wage support programs expire, while a spike in infections in many countries has led to some new restrictions on businesses and public may that may have to be broadened.

European governments have spent trillions of euros (dollars) to help businesses and to set up programs to keep workers on payrolls. In the region’s largest economy, Germany, some 3.7 million people are still on furlough support programs and with no clear end to the pandemic in sight, the government has extended that through the end of 2021. The program pays over 70 percent of the salaries for workers put on short hours or no hours. The European Central Bank has injecting 1.35 trillion euro ($1.57 trillion) into the economy to keep loans cheap.

But while those measures have slowed the rise in unemployment, the loss of jobs is steady and expected to continue for months. Companies in the hardest hit industries such as airlines, tourism and restaurants expect a long period of weak business and are laying off workers.

The rise of unemployment in the region undermines claims made by Democrat politicians in the U.S., including Biden, that the American economy has been hobbled by the Trump administration or that the U.S. recovery would lag Europe’s. In Tuesday’s debate, Biden falsely claimed Trump had caused the recession in the U.S.

The recession in some cases has also accelerated painful change that existed before the pandemic, such as technological shifts in the auto industry. Automakers Daimler and Renault, airline Lufthansa, oil company Royal Dutch Shell and travel concern TUI have announced sweeping cost-cutting and job reductions.

While industrial firms have made a stronger recovery from the severe lockdowns of March and April, services companies have done less well. Among the hardest hit are workers and small business owners in the restaurant sector, many of whom are struggling for survival.

Waiters and cooks in Lisbon’s city center, where the pandemic has seen tourist numbers drop and not everyone has been covered by furlough support.

Restaurant workers Mary Lopes, 21, Anabela Santos, 48, and Carlos Silva, 69, are among those struggling. They saw their once-buzzing restaurant in Lisbon close down completely in March. When it reopened, only a few of the staff were kept on, under tougher conditions and the others were left out of work. Santos and Silva are at least getting unemployment benefit but that barely covers their bills, Lopes is not.

“I’ve been working since I was 16,” said Lopes. “I was always complimented by the customers, so I can say I was a good waitress – I know I was a very good waitress. So I don’t understand this situation we are going through.”

Santos paid five months of overdue bills when she got her unemployment benefit, and sent resumes everywhere. “I haven’t managed to find another job,” she said.

“It’s an overdose of stress because we haven’t a penny in our pockets,” says Silva. “We are left without any money after paying rent, water, energy and then we are suffering for those thirty days until the next 28th of the month or so.”

—- The Associated Press contributed to this report.