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Anchor Marco Werman checks in with Time Magazine economics columnist Justin Fox on the state of the global recession.
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MARCO WERMAN: We’ve now heard from three countries – Lebanon, Spain, and the UK – about the employment situation there. Justin Fox you’re Time Magazine’s economics columnist. Put this into a wider global context for us. Can you give us a snapshot of how the global economy is fairing overall today, Labor Day.
JUSTIN FOX: Well I mean obviously there are lots of signs that the worst is over; that we may be in a recovery. But in the context of Labor Day it’s usually the employees who find out last about these recoveries. They show up in financial markets first and unemployment rates are usually lagging indicators. So just on a sort of globe-wide scale there are a lot of good economic signs. Almost none of them are in the employment numbers. I mean Canada actually had an increase in employment last month. But there’s not a whole lot of that going on outside of this handful of countries like China and India that have kind of cruised through this whole downturn mostly untouched.
WERMAN: Right and why is it different in Canada for example?
FOX: There are various theories. The biggest one is Canada did not have a big financial problem and that’s what … . I mean the United Kingdom and Spain they had financial crises as bad or worse than the US. I mean Spain’s housing bubble makes ours look – well not tame. That’s an exaggeration. But it was pretty spectacular. And so a country that didn’t have a financial crisis – the housing bubble to work through – you know it’s not going to have as bad a recession. Also in Canada it’s a very commodities-driven economy and so now that commodities prices have begun to recover some that helps as well.
WERMAN: There are distinct places – sort of patches across the planet – that have similarities economically speaking. How radically different from region to region is the employment scene right now?
FOX: Well I mean one thing that’s happened is countries that are really heavily dependent on manufacturing exports and that’s Asian countries like Japan or South Korea or Taiwan but it’s also Germany to a great extent. They all got just utterly hammered in terms of economic growth. I mean they’ve had sharper recessions than the US has but for the most part haven’t laid everybody off yet because they’re all just sort of hoping it’s this temporary thing and the global economy will get going again. I mean one thing that’s interesting that’s happened is the US, over the past 15 or 20 years, has always had substantially lower unemployment rates than the European Union. Right now we’re just about even.
WERMAN: As other countries around the globe emerge or at least might seem to be emerging from their recessions how does that affect the US economy?
FOX: It helps for the most part. The negative is that it increases demand for commodities and while we are exporters of some big commodities like corn we’re also a huge importer of the biggest commodity of them all – oil. So in that sense it sort of slows things down a little bit here. But I mean one positive sign in the US economy has been the manufacturing sector. Most signals are that it’s now on the growth path again and a significant part of that is demand from overseas for sort of high-end, US-manufactured products.
WERMAN: We do talk a lot about global competition these days. As economies come out of this recession will countries with similar economic situations actually help each other get out of this mess – at least until they can get steady – and then would competition presumably resume?
FOX: Well I mean competition is there all the time. At one level China’s ability to sort of keep chugging through this downturn has helped the world economy. It’s definitely helped keep things from being as bad as they would be otherwise. But I think from the Chinese perspective it’s also this great competitive statement that here we are. We’re still growing. We are now in utterly indispensable, global economic power.
WERMAN: Justin Fox, Time Magazine’s economics columnist. His new book is “The Myth of the Rational Market.” Justin thank you very much.
FOX: Thank you Marco.
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