As I mentioned in yesterday's post, which explained why the problems that plague the U.S. economy have little to do with a lack of Fed easing, " the Eurozone is the epicenter of the world's growth and financial concerns." We have yet to see any clear signs of a significant weakening of the U.S. economy, but there is no lack of such signs in the Eurozone.
This chart compares the Institute for Supply Management's survey of the manufacturing sector for the U.S. and for the Eurozone. Note how the Eurozone was doing somewhat better than the U.S. prior to the 2008 recession, but how severely the Eurozone has underperformed since. See more on this underperformance here, where I argue that this underperformance is a good proxy for the losses that have resulted from lending to countries (e.g., the PIIGS) that don't have the ability to service their debts. It's very likely that the Eurozone (with the notable exception of Germany) has been in a recession for most of the past year.
This chart compares the ISM indices for the Service Sector in the U.S. and in the Eurozone. Here we see the same pattern as with the manufacturing sector; the sovereign debt crisis is impacting everything in the Eurozone, while the U.S. continues with its relatively sluggish recovery. (As Robert Barro so ably notes in yesterday's WSJ, this "recovery" is arguably not a recovery at all, since real growth over the past year or so has been below the economy's 3% potential, thus leading to an ever-widening gap between where the economy is today and where it could be if economic conditions and policies were better.)
So most Eurozone economies probably have been in a recession for awhile, and maybe that has contributed somewhat to the slow growth of the U.S. economy. But the U.S. economy is still not even flirting with a recession based on the ISM indices, and although jobs growth is disappointing it is still positive. As the chart above suggests, we would have to see the ISM manufacturing index fall below 47 (it's currently at 53.5) before we could see recessionary conditions. The service sector index does not yet have enough data to make a similar comparison, but the current U.S. service sector reading is 53.4, which is enough above the 50 level to suggest continued expansion.
Just because the Eurozone is in a recession does not doom the U.S. economy to a similar fate.