Chart of the Day: Europe's New Lost Generation

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Published on Friday, 13 July 2012 15:09

Written by Adam English, Associate Editor, Inside Investing Daily

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While Europe's trials and tribulations play out in swanky conference rooms and the ivory towers of capital cities, a terrible disaster is brewing across the continent.

Official unemployment figures are quickly rising in the periphery nations of the eurozone. Spain and Greece now have youth unemployment rates above 50%.

Half of an entire generation of potential workers may essentially disappear.

Across the Atlantic, similar stories are popping up. Youth unemployment rates in the U.S. are at about 16% while Canada is sitting around 14%.

America's overall unemployment rate is hovering around 8.2%. Millions of underemployed workers and people have been out of work for well over a year.

At the same time, headlines regularly appear regarding high-pay, high-skill job openings that cannot be filled because potential employees lack experience and required skill sets.

Imagine how bad it would be if it was three times worse: Spain's overall unemployment rate is 24% and Greece is just under 22%.

As the few jobs available go to older workers, young people are being cut out of the traditional career tracks that justify promotions and better jobs. The preference for older workers grows over time as résumés from young workers lack relevant skills or references and develop long gaps in job histories.

Eventually, older workers have to move out of the workforce. By the time that happens, there will still be plenty of young Europeans sitting on the sidelines who do not come close to the needs of employers.

If economic conditions become favorable for a recovery, the gulf between job requirements and potential employee skills may be too wide. This disconnect would take large investments of time and money to bring new workers up to speed.

While that happens, tax and business revenue will remain depressed and productivity will dip. Investors have seen and will continue to see that as a sign of economic weakness, virtually guaranteeing capital will become increasingly hard to draw into national economies right as it is needed.

At a certain point, the youth unemployment disaster may form a feedback loop that cripples the potential for growth across the board. An entire generation of workers that Europe needs to pull itself out of a rut could be lost.