Is Europe in better shape than US?

After the great recession, the American economy rebounded faster and stronger than the euro zone, raising doubts over the effectiveness of the “European social model.” As Europe emerges from the first wave of the Covid-19 epidemic in better shape than the US, its combination of welfare states and strong public health systems
suddenly seems appealing again.
The US is still struggling to contain outbreaks in several states from Texas to Florida, whose healthcare systems are being pushed to the brink. The federal government has failed to articulate a unified message
for the country, as state
governors have taken conflicting decisions on the length and strictness of their lockdowns.
Meanwhile, in most European countries, the situation appears under control. From Germany to Greece, countries are dealing with a handful of flare-ups, but they’re being contained by localised restrictions. Governments have reopened their economies steadily, without causing a new surge of infections. The sacrifices of months of lockdown appear to be paying off for now.
Europe’s economy also appears to be improving. The euro zone is in the middle of a very steep recession, and the European Commission expects the bloc’s gross domestic product to fall by nearly 8% in 2020.
The difficulties in other parts of the world in managing the pandemic will weigh on exports — and especially on tourism. But restaurants, bars and shops don’t seem to be heading for a mass round of fresh lockdowns, unlike in the US Domestic demand, from consumers and governments, should keep recovering as long as the pandemic is kept in check.
Europe’s labour market institutions are cushioning the blow. Countries from Germany and France to Italy and the UK have generous furlough schemes, where governments are subsidising workers for the hours they’re not employed. Companies can keep more employees on their payroll without triggering a downward spiral of unemployment and falling demand. As the economy restarts, businesses aren’t having to go through the long and costly process of rehiring workers. The biggest problem for Europe will be making sure this doesn’t turn into never-ending life support for unviable companies and industries.
The experience of the euro zone and US labour markets since the pandemic shows the difference of the two approaches. The US unemployment rate stood at 11.1% in June, up from 3.5% in February. The actual number was probably worse.

—Bloomberg