Manpower EMEA Economic insight report looking at the stories behind the jobs economy

1. Manpower EMEA
Economic Insight Issue 7. November 2010
EMEAMacroEconomicInsight
EA16 and EU27 government deficit at 6.3% and
6.8% of GDP respectively. Government debt
increases to 79.2% and 74.0%
In 2009, the government deficit and government debt of
both the EA16 and the EU27 increased compared with 2008,
while GDP fell. In the EA16 government deficit to GDP ratio
increased from 2.0% in 2008 to 6.3% in 2009 and in the
EU27 from 2.3% to 6.8%. In the EA16 government debt to
GDP ratio increased from 69.8% at the end of 2008 to 79.2%
at the end of 2009 and from 61.8% to 74.0% in the EU. In
2009 the largest government deficits in percentage of GDP
were recorded in Greece (-15.4%), Ireland (-14.4%), the
United Kingdom (-11.4%), Spain (-11.1%), Latvia (-10.2%),
Portugal (-9.3%), Lithuania (-9.2%), Romania (-8.6%),
Slovakia (-7.9%), France (-7.5%) and Poland (-7.2%). No
Member State registered a government surplus in 2009. The
lowest deficits were recorded in Luxembourg (-0.7%),
Sweden (-0.9%) and Estonia (-1.7%). In all, 25 Member
States recorded a worsening in their government deficit
relative to GDP in 2009 compared with 2008, and two
(Estonia and Malta) an improvement.
EA16 and EU27 GDP up by 0.4%
GDP increased by 0.4% in both the EA16 and the EU27
during the third quarter of 2010, compared with the previous
quarter, according to the latest estimates published by
Eurostat. In the second quarter of 2010, growth rates were
+1.0% in both zones. Compared with the same quarter
of the previous year, seasonally adjusted GDP increased
by 1.9% in the EA16 and by 2.1% in the EU27 in the third
quarter of 2010, after +1.9% and +2.0% respectively in the
previous quarter. During the third quarter of 2010, US GDP
increased by 0.5% compared with the previous quarter, after
+0.4% in the second quarter of 2010. US GDP rose by 3.1%
compared with the same quarter of the previous year (+3.0%
in the previous quarter).
Industrial production down by 0.9% in EA16 and
down by 0.5% in EU27
In September 2010 compared with August 2010, season-
ally adjusted industrial production fell by 0.9% in the EA16
and by 0.5% in the EU27. In August 2010 production rose by
1.1% and 0.9% respectively. In September 2010 compared
with September 2009, industrial production increased by
5.2% in the euro area and by 5.8% in the EU27.
Construction output down by 2.1% in EA16,
down by 1.7% in the EU27
In the construction sector, seasonally adjusted production
fell by 2.1% in the EA16 and by 1.7% in the EU27 in Sep-
tember 2010, compared with the previous month. In August,
production decreased by 0.4% in the EA16 and remained
stable in the EU27. Compared with September 2009, output
in September 2010 dropped by 8.1% in the EA16 and by
3.6% in the EU27
EA16 annual inflation up to 1.9%,
EU up to 2.3%
EA16 annual inflation was 1.9% in October
2010, up from 1.8% in September. A year
earlier the rate was -0.1%. Monthly
inflation was 0.4% in October 2010. EU
annual inflation was 2.3% in October 2010,
up from 2.2% in September. A year earlier
the rate was 0.5%. Monthly inflation was
0.3% in October 2010. Compared with
September 2010, annual inflation rose in
fifteen Member States, remained stable in
six and fell in five.
Unemployment remains static
EA16 seasonally-adjusted unemployment
rate was 10.1% in September 2010,
compared with 10.0% in August. It was
9.8% in September 2009. The EU27 un-
employment rate was 9.6% in September,
unchanged compared with August. It was
9.3% in September 2009. Estimates show
that 23.109m men and women in the EU27,
of whom 15.917m were in the EA16 were
unemployed in September 2010.
Compared with August, the number of
persons unemployed increased by 71,000
in the EU27 and by 67, 000 in the EA16.
Compared with September 2009,
unemployment rose by 0.656m in the EU27
and by 0.424m in the euro area.
EA16 annual inflation up to 1.9%,
EU up to 2.3%
EA16 annual inflation was 1.9% in October
2010, up from 1.8% in September. A year
earlier the rate was -0.1%. Monthly infla-
tion was 0.4% in October 2010. EU annual
inflation was 2.3% in October 2010, up
from 2.2% in September. A year earlier the
rate was 0.5%. Monthly inflation was 0.3%
in October 2010. Compared with Septem-
ber 2010, annual inflation rose in fifteen
Member States, remained stable in six and
fell in five.
Retail volume trade down by 0.2%
in EA16, down by 0.1% in EU27
In September 2010, compared with August
2010, the volume of retail trade decreased
by 0.2% in the EA16 and by 0.1% in the
EU27. In August retail trade fell by 0.2% in
both zones. In September 2010, compared
with September 2009, the retail sales index
rose by 1.1% in the EA16 and by 1.3% in
the EU27.

2. Manpower EMEA
Economic Insight Issue 7. November 2010
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EU contagion in the spotlight
The finances of the Irish Republic are under major scrutiny after the
country’s government and central bank finally accepted a European
Union led bail-out, supported by the IMF. The exact figure is still to
be determined but is expected to be in excess of €90bn.
The so called “Celtic Tiger economy” was initially built around the
property market, but since the start of the financial crisis in 2008,
the construction sector has seen a dramatic fall in output. House
price values are estimated to have fallen by between 50% and 60%
and bad debts which primarily involved debts by construction
developers have left the main Irish banking groups facing serious
liquidity problems. Those liquidity problems were initially solved
by part nationalisation of the banking sector but with the on-going
problems in the economy, tax revenues have also taken a sharp
decline. The revenue gap between Government spend and tax
revenues is currently running at 12% of GDP with current figures
this year showing that Ireland has a budget deficit equivalent to
32% of GDP. Due to these factors the Irish Government is now
facing liquidity problems of its own. The three main Irish banking
groups have wholesale debts amounting to €110bn, which are due
for repayment in a little over three years. Without EU backing, this
is unlikely to be rolled over and therefore would have placed even
more pressure on the whole of the Irish economy. Coupled with
the increasing likelihood of personal bad debt adding to the total
debt mountain, confidence in the Irish economy is at a low point.
However to try and stabilise the situation both the UK and Swedish
Governments have offered direct loans to the Irish Republic.
Further political problems may also be encountered as Ireland has
a relatively low level of corporation tax (currently 12.5%) which
French and German politicians claim give Ireland an unfair
advantage in attracting foreign investment. Political pressure may
be placed upon the Irish Government to revise upwards the
corporate tax rate as a condition of receiving EU/IMF bail-out
money, however the Irish Government has resisted calls to increase
the rate so far. Several major corporations based in Ireland have
also questioned the need to raise the corporation rate.
But the current crisis in Ireland has placed more emphasis on the
financial concerns about Europe’s other highly indebted countries.
Greece has now announced their formal austerity budget plan
which aims to cut the 2011 public deficit to 7.4% of GDP. After the
€110bn bail-out that it received in May, this would mean a €5bn
reduction on the projected 2010 deficit. Major cuts to health
services and the defence budget are planned along with an
increase in sales tax to 14% (from 11%). The third trance of the bail
out money has been issued (worth €9bn) but despite the existing
cuts the Greek Government has been told to broaden the tax base
and eliminate further wasteful spending.
The primary worry is that other indebted nations such as Portugal
and Spain may also seek additional funding, but as bond yields
have increased, any addition borrowing will prove to be much more
expensive on the international money markets. This will just add
to the existing debt burden, therefore the need to borrow from the
newly established EU central fund may increase.
Industrial relation problems will also hit Portugal this week as a
general strike has been called for the 24th November in protest at
major cuts to civil service pay and pensions.
Therefore the outlook is far from clear at present.
Disparity of holiday season
A new report by the EU highlights the
seasonal distribution of demand for
tourism, with Europeans taking 46% of
their holidays in Q3. This is one of the main
challenges and also opportunities facing
the European tourism industry. Extending
the tourism season or spreading tourism
activities more evenly throughout the year
can significantly boost the sustainability
and competitiveness of European
tourist destinations as well as having a
direct impact on the jobs economy for the
tourism sector.
EU27 surplus in trade in goods
with the USA almost doubled in
the first six months of 2010, deficit
of €7bn in trade in services in 2009
The USA remains the EU’s largest trading
partner for both goods and services, and
there are also significant
investment flows between the two part-
ners. However, a steady decline of the
share of the USA in total EU27 trade in
goods has been observed over recent
years. In 2000, the USA accounted for 28%
of total EU27 exports, compared with 19%
in 2009. The share of USA in total EU27
imports also fell over this period, from 21%
in 2000 to 12% in 2008, before recovering
slightly to 13% in 2009. Among the EU27
Member States, Germany (€30bn or 27% of
EU exports of goods) was by far the largest
exporter to the USA in the first half of 2010,
followed by the United Kingdom (€18bn or
16%), France (€11bn or 10%), Italy (€10 bn
or 9%), Ireland and Belgium (both €9 bn or
8%). Germany and the UK were the larg-
est importers (€15bn or 18% of EU imports
each), followed by the Netherlands (€13bn
or 16%) and France (€10 bn or 12%). In the
second quarter of 2010, the EU27 external
current account recorded a surplus with
the USA (€19.4bn), Switzerland (€9.6bn),
Hong Kong (€5.7bn), Brazil (€5.2bn),
Canada and India (both €1.8bn), and a
deficit with China (-€31.5bn), Russia
(-€13.0bn) and Japan (-€8.6bn).
EMEAEconomicInsight

3. Manpower EMEA
Economic Insight Issue 7. November 2010
EMEACountryInsight
OECD Reports mixed speed recovery
A recent report by the OECD points to a mixed speed
economic recovery taking place with Europe, which was
also the conclusion of the Q4 MEOS report released in
September. Economic expansion is likely to continue in
Germany and the resource rich Russia. However, there is
likely to be a slowdown in France, Italy and the UK, the
impact of which is likely to be felt in Q1/Q2 2011.
Focus remains on unregistered workers
Research by Visa Europe recently reported that the grey
economy within Italy could account for as much as 22% of
GDP. Unregistered work was particularly prevalent in the
agricultural, construction and tourist sectors. Turkish
officials have also recently released figures indicating that
39,000 employers have been fined in the last two years as a
total of 850,000 people have been caught working on an
unregistered basis.
Russia:
Confusion over pension age
The Russian President has stated that there are no plans
at present to increase the state retirement age in Russia.
Currently the state retirement age is 60 for men and 55 for
women. This follows earlier reports that the Russian Finance
Minister is looking at raising the retirement age to 62 for men
and 60 for women.
POLAND:
Changes to bank holiday rules
Poland has announced an amendment to the Labour Code
making January 6th a public holiday. The code has also been
amended so that employers will also no longer be obliged to
give employees an additional day off if future public holidays
fall on a Saturday. The changes to the code come into effect
in January 2011.
SWEDEN:
European jobs days organised for unemployed
Sweden’s National Public Employment Service is currently
organising a series of one-day workshop encouraging the
unemployed to seek employment opportunities outside of
Sweden. The workshops, run in conjunction with the
European Job Mobility Portal, are initially targeting areas in
northern Sweden where unemployment in some local areas
is currently over 12%. Job opportunities are focused in
Spain, Norway, the UK, Germany, and the Czech Republic.
SLOVAK REPUBLIC
Language skills updated
The Slovak government has announced that English lan-
guage will become a compulsory subject in all elementary
schools. The change, which was originally announced in
September, follows news that 50% of current job
advertisements ask for English language skills.
Netherlands:
Pension agreement reached
The Dutch government has been able to
reach agreement with coalition partners to
raise the state retirement age from 65 to
66. The new age limit will likely come into
force in 2020. The initial idea was to raise
the age in line with life expectancy but this
has proved a step too far for some
coalition partners. In another change to
the Dutch pension regulations, a one year
exemption is being introduced in 2011 so
that pension funds can make the
necessary changes to their equity base.
The changes are necessary to ensure that
premiums remain affordable following
changes to how they are calculated in
future. Without the extension pension
levels would have been cut, indexation
may have been removed or considerable
increases to premiums would have had to
be introduced.
Bulgaria:
Extension of free travel area
The Bulgarian Government is looking to
enter into negotiations to gain
membership to the Schengen agreement.
The agreement allows for borderless
travel between the majority of EU member
states. However several original EU
members are opposed to Bulgarian entry
in the near future.
European pensions benefits
New research reveals that nearly 50% of
European workers would sacrifice pay for
a higher pension contribution by their em-
ployer, compared to only 13% who would
give up some of their salary for extra holi-
days. 7,500 workers from across Belgium,
Denmark, France, Germany, Ireland, The
Netherlands, Norway, Spain, Switzerland
and the UK were surveyed for the Europe-
an Employee Benefits Benchmark survey.
UK
Mixed reaction to migration report
The latest Migration Advisory Committee
report says that achieving the govern-
ment’s target of reducing visas for skilled
workers will mean thousands of fewer
visas will be issued. Business leaders have
expressed concern that changes do not
damage the fragile recovery, which is partly
dependant upon skilled migrants.

4. EMEAEmploymentInsight
Manpower EMEA
Economic Insight Issue 7. November 2010
Unilever puts sustainability at centre of new
global business model.
FMCG giant Unilever has revealed a new business model
which puts sustainability at the centre of its global
operations. During the launch of the company’s
Sustainable Living Plan, Paul Polman, CEO, revealed plans
to halve the environmental impact of its products while
doubling sales over the next 10 years. Unilever made three
overarching commitments to be achieved by 2020 and said
it would produce an annual report on its progress towards
achieving these goals of:
•50% reduction in the environmental impact of its products in
terms of water, waste and greenhouse gases.
•Source 100% of its agricultural supplies from sustainable
sources.
•Improve the health & well-being of one billion people across
the world.
A number of other leading multinational companies have
made similar sustainable impact commitments most
notably WalMart, the world’s largest public corporation by
revenue, which has introduced sustainability criteria as part
of its official product-sourcing process. Earlier this month,
Unilever reported profits of €1.35bn for the three months to
the end of September 2010.
Visit www.sustainable-living.unilever.com/the-opportunity for details
Walmart seeks merger with Massmart.
Walmart, the worlds largest retailer, has announced that they
are in talks to buy Massmart, a South African wholesaler, for
a reported $4bn. Massmart, with approx 250 stores,
operates across Sub-Sahara Africa.
In a separate announcement, Walmart’s UK operation,
ASDA, announced expansion plans which could create in
excess of 7,500 jobs.
Toyota reports profits continue to soar
Profits at Japanese carmaker Toyota have continued to soar,
with second quarter earnings nearly doubling to 98.7bn yen.
The company raised its profit forecast again, predicting
earnings of 380bn yen for the full year. However Executive
Vice President Satoshi Ozawa spoke of a “very tough busi-
ness environment, characterised by the radically and seri-
ously appreciated yen in recent months as well as the risk of
slowdown in demand recovery in the both the United States
and Europe.”
Scania AB and MAN SE confirm merger option
Commercial truck manufacturers Scania AB of Sweden and
Germany’s MAN SE have confirmed that they are looking at
a potential merger. Volkswagen AG, a major shareholder in
both operations is believed to be active in the negotiations.
Cost synergies, manufacturing processes and R&D
operations are cited as the main reasons behind the
exploratory talks.
China’s C919 passenger jet wins
first orders
The Commercial Aircraft Corp of China
(Comac) has taken its very first orders for
the C919 passenger plane. The move could
mark the start of a challenge to the
dominance of both Boeing and Airbus
who have virtual control of the commercial
passenger aircraft industry sector. The
company’s chief accountant, Tian Min, on
announcing the order said: “In the future
we expect to see 3,000 new planes in
China and more than 30,000 new planes
globally. So this is a very big market.” The
C919 competes directly with Boeing’s 737
and the Airbus A320 with Comac expecting
to sell more than 2,000 C919s over the next
20 years. According to recent estimates the
highly competitive segment could be worth
as much as $1.7trillion over the next 20
years. Comac expects to start building the
aircraft next year, which is currently in the
engineering development phase, followed
by a maiden flight in 2014 with first delivery
expected in 2016.
The Comac news coincides with the launch
of the new whitepaper by Manpower on the
Chinese market. Manpower’s new Fresh
Perspectives Paper: Winning in China:
Building Talent Competitiveness, advises
both foreign and Chinese private-owned
companies on how to win the talent war.
The paper is based on Manpower’s 2010
Foreign and Chinese Private-Owned
Companies Talent Competitiveness Survey.
Banco Bilbao enters Turkish
banking sector.
The Economist reports that Spain’s Banco
Bilbao Vizcaya Argentaria has made its
first large scale acquisition outside of the
Spanish-speaking market. In early
November Banco Bilbao announced that
it was acquiring nearly 25% of Garanti,
Turkey’s second-biggest bank. BBVA has
launched a €5bn rights issue to help fund
the deal.
Visit www.manpower.com/research/research.cfm for details
How will the changing world of work affect you?
Watch out for the next MEOS Report which is released
on 7th December.