The Great Recession may have ended worldwide, but there seems to be no end in sight for the global labour market downturn that accompanied it, especially in the so-called advanced economies.
In many countries the job losses and their slow recovery, which are of historic proportion, have the potential to threaten their long-term economic and social stability.
In the United States, the epicenter of the slump, unemployment clawed back to a near-double-digit 9.8 per cent last month, perilously close to October 2009’s peak rate of 10.1 per cent, the highest jobless figures recorded since the current economic woes started in 2007.
In France, the October unemployment rate was an almost identical 9.7 per cent, and in neighbouring Italy it was 8.3 per cent, the highest in seven years. Although Britain, which reported a jobless rate of 7.7 per cent in September, appears comparatively better off, the fact that more than a quarter—27.3 per cent, to be precise—of the country’s workforce now consists of part-time employees is a cause for great concern.
Overall, the unemployment rate in the 27 European Union countries was 9.6 per cent in October, up from 9.4 per cent a year ago. Among the major European economies, Germany is the only nation where the employment figures reached pre-recession levels.
With every passing month, it is becoming more and more evident that what prevents these and other developed countries from making full recoveries are their weak job markets. A case in point is the United States, where only one in nine workers that lost the job so far could find full-time employment. In fact, though the US recession was triggered by a mortgage and housing crisis, it was the implosion of the American job machine that precipitated the downturn.
To get a sense of how bad the job situation in America is, consider the following. More than 8 million Americans lost their jobs in 2007 and 2008. That is more than the combined population of the UAE and Oman. The number of officially unemployed Americans, which is more than 15 million, is more than the population of all GCC countries except Saudi Arabia. In reality, the US job market is in much worse shape than what the official unemployment statistics indicate. When one brings the underemployed to the mix, at least a quarter of American workers are unemployed or underemployed.
The jobs recovery in advanced economies is so tardy that the International Labour Organisation, a United Nations agency, predicts that employment figures will not reach pre-crisis levels until 2015, revising its last year’s projection that the number of jobs lost would be regained by 2013.
A recent survey in the United States by the National Association for Business Economics, a trade group of business economists, revealed that the present jobs recovery rate in the country is the weakest post-recession jobs gain on record.
From the experiences of the US and other economies, it is unmistakably clear that their road to complete recovery passes through the job market. As long as a significant section of their jobless citizens are not brought back to the workforce, a real economic upturn is out of the question. As the International Labour Organisation pointed out in a recent report, not restoring their jobs have political and social costs as well. It cited finding incidents of social unrest linked to the financial crisis in at least 25 countries, many of them developed nations.
In the United States, we have already seen the political ramifications of the bad job market. In last month’s mid-term elections, it cost President Barack Obama’s Democratic Party the majority in the House of Representatives. America is not the only country, where people’s confidence in government has decreased. In half of the 72 countries the International Labour Organisation surveyed, “people have less confidence in governments now than prior to the crisis.”
In this depressing backdrop, policymakers in the United States and European Union member states, have their work cut out. Implementing policies that will create jobs and prevent the current crisis from becoming a prolonged worldwide employment slump should be their first priority in the New Year.
In recent months, several creative measures have been suggested to counter the employment problem. The International Labour Organisation has proposed strengthening “job-centered policies,” while former British Prime Minister Gordon Brown has called for a US-led global effort, similar to the Marshall Plan, to put the world economy back on track. As a business leader, I would like to see more steps from the governments that will help businesses overcome the current crisis of confidence. In many countries, the primary reason jobs-creation is lagging is companies are reluctant to hire. Despite having $2 trillion on their balance sheet, US firms are holding out on investments because of fear and market uncertainty. Lack of confidence in the market is also the reason British companies are filling their employee needs with part-time workforce. Prolonged jobless situation in the Europe and America is not good news for the rest of the world. What’s happening there will affect other regions and nations, including the GCC, Japan, BRIC countries (Brazil, Russia, India and China), Africa and Latin America.
Some key figures released this week by Eurostat serves as a stark reminder of that reality. According to the EU’s statistical office, total outflow of worker’s remittances fell by 7 per cent in 2009, the first such decline in six years. As for who would be affected by a fall in remittances, it is easy to guess.