“U.S. Unemployment Rate Now as High as Europe,” gloats a new issue brief from the Center for Economic and Policy Research.  The subtext: Europe’s heavy labor market regulation isn’t so bad after all.  In fact, since the “case for the superiority of the U.S. model was always exaggerated,” maybe the European model is better.  Let’s take look at the brief’s main graph:


Frankly, a Europhile would have to be demented to take comfort in this graph.   Can one year of parity wipe out a decade and a half of vastly inferior performance?  If you take a look at this graph from the JEP, you’ll see that Europe’s inferiority began long before Eurostat starting keeping tabs.  Europe has done worse than the U.S. for the last 25 years.  The U.S. recovered from the monetary and oil shocks of the 70s and 80s, but Europe has never been the same.
Now take another look at the CEPR graph.  During the dot-com bust, U.S. unemployment remained below Europe’s, but it clearly rose faster.  Isn’t this further evidence that the mainstream case against European labor market regulation is overstated?

On the contrary, this is precisely what the mainstream case predicts!  Europe makes it harder to get rid of workers, so it’s only natural that when a big shock hits, U.S. unemployment rises more.  However, precisely because it is easier for American wages to adjust and American employers to change their minds, our labor market is also relatively quick to recover.

Unemployment is a terrible thing.  It’s not just a waste of resources.  It also makes people miserable far more than an equivalent income loss.   When you read the history of the Great Depression, it’s hard not to notice another horrible cost: Unemployment undermines support for a free society by robbing ordinary people of their independence and self-respect.  By this standard, the U.S. is temporarily doing poorly.  But it won’t last.  In the U.S., unlike Europe, high unemployment is not a way of life.