Transatlantic Divergence, by Paul Krugman, in NY Times: Deadline pressure, so not much blogging this weekend. But pursuing the theme that America is doing the least worst among major economies, here’s a chart I find illuminating:
In the early stages of the crisis, unemployment rose more rapidly in the US than in Europe. This mainly reflected differences in institutions: it’s much easier to fire people in America. From some point in 2010 onward, however, the US situation has gradually improved; initially some of the drop in unemployment was basically people leaving the labor force, but more recently there have been solid though modest gains in the ratio of employment to the relevant population (you have to adjust for aging).
Meanwhile, Europe has gotten much worse; now formally in recession, but the truth is that it has been going downhill all along.
Why the divergence? The obvious answer is that the austerity stuff broke out in 2010, and the austerians took over policy much more completely in Europe than in the United States.