Unemployment rates will rise, analysts say

"Households are not spending, firms are not spending, and governments are making cuts," said Simon Tilford, chief economist at the CER in London. "There is no doubt that fiscal austerity is exacerbating economic weakness." ... Tilford points to Germany's ability to control wage growth in the past decade as the primary factor in relatively strong economic growth numbers through early this year, a phenomenon that saw corporate profits soar as a percentage of GDP but likely saw those profits poorly distributed. This has contributed in part to what is a "big obstacle" to future economic growth - low domestic demand for Germany's own products, Tilford said. "We have seen that trend across the West, but especially in Germany ... No economy, not even one as export-dependent as Germany, can live on exports alone." ... While Tilford said supply-side reforms and more proactive, expansionary policy by the European Central Bank could help head off the worst of a Europe-wide employment crisis, he expressed doubts that such things will come to fruition in the near term. "The labor markets look pretty grim ... Unemployment rates are going to pick up."