Nations with the Highest Unemployment Rates

This week’s economic and market news headlines have been dominated largely by Mario Draghi’s bond-buying program and now by an official unemployment rate of 8.1% with only 96,000 payrolls added in the United States during August. What was hardly covered was the record high unemployment rate of Greece after the official unemployment rate hit 24.4% in June after an already dismal reading of 23.5% in May.

24/7 Wall St. wanted to know something else, and not just on Greece and how its massive unemployment rate has risen. We want to know which other nations have the worst unemployment rates in the world. Greece is not even the worst.

It is important to realize that the situation in Europe has still gotten worse since all of the last unemployment reports, so it will not be a huge shock if that dismal figure from Greece (and elsewhere) gets even worse for July and for August. Mario Draghi’s pledge to do whatever it takes was roughly a month after the end of June. The global growth story has still been slowing elsewhere too, so we really are wanting to see which nations are suffering along with Greece.

In order to qualify, a nation had to be economically important enough to be covered in the global economic charts published each week in The Economist. This of course omits many smaller economies where unemployment pressure may be very high, but many people in the world might not even be able to locate those nations on a map. The euro area was given an unemployment rate of 11.3% in July, and to qualify for the worst employment status here a nation had to be at least one point above that average.

Perhaps even more important than just having the highest unemployment rates is what the prospects are for each of these nations. For broader expectations ahead, we have quoted the latest data from the Economist Intelligence Unit. The nine nations with the worst unemployment rates are listed as Poland, Egypt, Slovakia, Ireland, Portugal, Latvia, Greece, South Africa and Spain.

The list has been put in ascending order of unemployment from those nations in bad shape to really bad shape to those in dire straits. We also have included the CIA World Factbook data showing the most current population estimates as well as the 2011 GDP estimates on a purchasing power parity basis. We have included our own takes on these nations for their long-term prospects as well.

Here is how the rest of the world’s weakest employment economies measure up.

Poland at 12.3% Unemployment in July

> Population: 38.4 million
> 2011 GDP: $781.5 billion

The Economist put the latest GDP reading at +2.4% for the second quarter, while industrial production in July was up by 5.2%. Consumer prices were up 4.0% as recently as July. The Economist Intelligence Unit‘s most recent outlook stated:

We expect the centre-right Civic Platform (PO) to remain the largest party over the 2012-16 forecast period. The coalition comprising the PO and the agrarian Polish Peasants’ Party has a small but workable majority in parliament, however rising intra-coalition tensions over fiscal reform are likely. Real GDP grew by 4.3% in 2011. It will average 3.4% in 2012-16.

Our take: Poland was a bit surprising to see on the list as it is generally deemed to be one of the more promising and more progressive of the Eastern European nations. The country avoided a technical recession and the government has moved to adopt deficit reduction reform.

Egypt at 12.6% Unemployment in the Second Quarter

> Population: 83.7 million
> 2011 GDP: $525.6 billion

The Economist put the latest GDP reading at +5.2%, but we would caution that this was a reading from the first quarter of this year. Industrial production in June was said to be up by 1.4% and consumer prices were up a sharp 6.4% in June. The Economist Intelligence Unit‘s most recent outlook is not very favorable as the news reports include hints of devaluation plans and attacks in Gaza even as a new government forms. It stated:

Political uncertainty will remain high in the early part of the forecast period as the division of powers between the Supreme Council of the Armed Forces and elected officials remains unclear. The Muslim Brotherhood’s Mohammed Morsi was elected president in June. Political instability will continue to weigh heavily on the economy, which has been crippled by a lack of new capital inflows, disruptions to manufacturing and a decline in tourism.

Our take: Egypt remains in a quagmire. Things do not seem any better from an outsider’s view, and it seems that outside businesses are likely to remain in a “wait and see” position before making real financial commitments here. Another risk is that unemployment rates in the cities and among the younger workers remain much worse than the official figures.

Slovakia at 13.3% Unemployment in July

> Population: 5.5 million
> 2011 GDP: $128.5 billion

The Economist listed Slovakia’s gross domestic product with growth of 2.8% in the second quarter, but the industrial production came in at a very high 11.3% as recently as June. The consumer price index was up by 3.6% in July. The Economist Intelligence Unit said in its outlook:

Slovakia is governed by the Direction-Social Democracy (Smer-SD) in a single-party government, following a snap election on March 10th. We view the chances of Smer-SD ruling throughout the 2012-16 forecast period as high. The government will undertake radical reforms covering taxation, healthcare and pensions, and it will also allow the privatisation of some state assets, in order to balance the public finances. After an estimated expansion of 3.3% in 2011, we expect growth of 3% in 2012-16.

Our take: This looks like a situation where growth will remain on the decline, so unemployment is unlikely to stage any massive change. That being said, it is still one of the newer euro members and its economy is considered more competitive than other problem nations in the area.

Ireland at 14.7% Unemployment in August

> Population: 4.7 million
> 2011 GDP: $183.9 billion

The Economist put the latest GDP reading at +1.3%, but that was a first-quarter reading. Industrial production in July was up as much as 6.5%, so maybe things are looking better after all. Ireland’s inflation looks to be taming as well since the Consumer Price Index was up by only 1.6% as recently as July. The Economist Intelligence Unit has noted a possibility of an early election while bank sector woes remain. It noted:

The Fine Gael-Labour Party coalition government is likely to serve its full five-year term to 2016, but political stability and government effectiveness will be tested. Economic policy will remain focused on implementing unpopular austerity measures, and financial and structural reforms agreed in exchange for an EU/IMF bail-out, but the government is seeking some form of debt relief. After expansion of 1.4% in 2011, we forecast contraction of 0.5% in 2012. Real GDP will grow by 1.9% in 2013-16.

Our take: If one nation of the PIIGS has a chance to emerge from the ashes, it is Ireland. The people have proven to be resilient and so far have continued to work toward the needed reforms, even if things feel almost like another potato famine.

Portugal at 15.0% Unemployment in the Second Quarter

> Population: 10.8 million
> 2011 GDP: $252.2 billion

The Economist showed Portugal’s GDP reading at -3.3% for the second quarter, but industrial production was only -0.1% as recently as July. Consumer prices were up by 2.8% in July. The Economist Intelligence Unit recently said that its current account deficit was falling fast, but there is a long way to go before external solvency is assured. Things are still dire. More specifically it noted:

Portugal faces a severe economic adjustment in the coming years. The country’s bail-out programme via the EU/IMF/European Central Bank emergency credit facility entails tough fiscal consolidation measures and structural reforms. Good progress has been made, but political and social stability will be tested in the years ahead. After contracting by 1.6% in 2011, real GDP is forecast to shrink by 3% in 2012. Portugal will also remain hostage to the wider development of the euro zone crisis.

Our take: Portugal often takes a backseat to the other PIIGS, but the problems here are many. Portugal remains a nation where things are likely to get worse before they can get better.

Latvia at 16.1% Unemployment in the Second Quarter

> Population: 2.2 million
> 2011 GDP: $35.37 billion

The Economist put the latest GDP reading up at 5.1% for the second quarter, and industrial production in July was up by an even higher 5.3%. Inflation here is tame as consumer prices were up by only 1.7% as recently as July. The Economist Intelligence Unit shows in its outlook:

The ruling coalition lacks a formal majority, and is unlikely to last in its current form for a full term. The continuation of Valdis Dombrovskis as prime minister and Andris Vilks as finance minister will ensure policy continuity. If market access is compromised by rising risk aversion globally, the government could have to turn back to the IMF and EU for support. After expansion of 5.5% in 2011, GDP growth is forecast at 3.2% in the 2012-16 forecast period.

Our take is to take a pass on Latvia since most people are not aware of the tiny Baltic nation.

Greece at 24.4% Unemployment as of June

> Population: 10.76 million
> 2011 GDP: $298.1 billion

The Economist put Greece’s GDP at a dismal -6.0% in the second quarter, but the June reading of industrial production actually was shown to be up 0.4%. Consumer prices were up by 1.3% as recently as July. The Economist Intelligence Unit already paints a dismal outlook and said:

The centre-right New Democracy party, which supports Greece’s bail-out deals in principle, won the June 17th election. It has formed a pro-euro coalition government with left-leaning parties. But anti-austerity forces in parliament are strong. Real GDP contracted by 6.9% in 2011. It will contract further by 4% in 2012-13, before growing by 1.7% in 2014-16. Another debt restructuring is likely by 2014. The risk of euro exit is high amid economic hardship, social unrest and political instability.

Our take: Bond buying or not, bailouts or not, Greece is likely to be the first formal exit of the euro. The situation is getting worse and the austerity measures may prove to be too much for a nation that is used to playing by different rules when it comes to taxes, benefits and retirement. With the ability for any new election to hinge on calls for a euro exit, the Drachma is likely to return and the printing presses will have to be turned on.

South Africa at 24.9% Unemployment in the Second Quarter

> Population: 48.8 million
> 2011 GDP: $562.2 billion

The Economist put the latest GDP reading at +3.0% for the second quarter, but industrial production in June only rose by 1.0%. Consumer prices were up by as much as 4.9% as recently as July. The Economist Intelligence Unit‘s news is dominated by the fallout after the Marikana platinum mine labor woes after a police massacre left dozens of protesters dead. Its most recent outlook states:

Jacob Zuma, the president, will try to strengthen the ruling African National Congress and deliver socio-economic development, but popular impatience and political in-fighting will make this a challenge in the 2012-16 forecast period. Boosting economic growth, jobs and investment will remain the government’s primary focus. Real GDP grew by 3.1% in 2011 and is forecast at 3.5% in 2012-16.

Our take: South Africa remains one of the most promising economies in Africa, yet the solutions are fleeting and problems of the nation are deep. Inequality and crime are always an issue in a nation that is laden with immense resource wealth. Still, the problems in South Africa may be considered a good model when other nations in Africa are brought up in comparison.

Spain at 25.1% Unemployment in July

> Population: 47 million
> 2011 GDP: $1.43 trillion

The Economist put the latest GDP reading at -1.0% for the second quarter, while industrial production in June was down 6.9%. Consumer prices were up 2.2% as recently as July. The Economist Intelligence Unit‘s most recent notes include:

We forecast a contraction of GDP of 2.2% in 2012 and of 0.7% in 2013. Growth of 1.2% is expected in 2014-16. Following bail out of the country’s banking sector, a strong possibility remains that the country is forced into a full assistance programme within months.

Our take: With Spain being the 14th-largest economy in the world, Spain’s future likely is a much better barometer of troubled nations in Europe than Greece. Spain’s woes are in many cases as bad or even worse than Greece, particularly since credit ratings are still dwindling and the need for a bailout is only growing as the recession is extremely likely to continue ahead. Bailouts and Draghi’s bond buying aside, Spain’s woes may be too great to expect any great changes any time soon on the employment front.

JON C. OGG