Figure 5Where have all the jobs gone?
Figure 6Which countries are the largest employers of the world?
Figure 7The average duration of unemployment in the US has hit historic highs
In October, high-ranking policymakers will gather in Washington D.C to assess the prospects for the global economy at the annual World Bank-IMF meeting. At a time when economic optimism is gaining momentum in the advanced economies, it’s easy to focus on the economic numbers and ignore the human cost of the crisis. So what does our analysis show on the status of the global job market?
Our analysis of the data shows that advanced economies have borne the brunt of the financial meltdown. Specifically, since the second quarter of 2008, advanced economies have lost 7 million jobs. The US, Japan and the peripheral Eurozone economies together shed more than 9 million jobs. Surprisingly, Spain’s job losses topped that of the US, which is the largest economy in the world.
On the bright side, Germany, Australia, Canada and the UK are the only major advanced economies bucking the trend, and have created around 3.5 million jobs since Q2 2008.
As a result, unemployment rates remain stubbornly high; Figure 1 (see page 1) shows that the average across the major advanced economies has been higher than 8% for more than four years.
On a global* scale, the picture is much more positive as over the same period the world has created a total of 37 million jobs. A third of these were created in the last 12 months, which is consistent with our view of a pickup in global economic activity increasingly led by the US and other advanced economies (see September Global Economy Watch).
Bringing together the analysis, we can see that, for every job that has been lost in the advanced economies, six new ones have been created in the emerging world - around 44 million net new jobs in total in emerging economies since the second quarter of 2008. China, Indonesia and Mexico lead the job creation scoreboard, reflecting the relative dynamism of these markets. As a result, unemployment in these economies is low, averaging only around 5%.
At the same time, emerging economies are increasingly employing a greater number of people. For example our analysis points out that Turkey hosts more jobs than Italy and now ranks as the 11th largest employer in the world (up from 13th in 2008).
So what are the implications of these trends and changes for businesses and policymakers?
First, let’s focus on the good news. High unemployment (or spare capacity) has presented policymakers in most advanced economies with the opportunity to deploy unprecedented stimulus without having to worry too much about inflation (although the UK is a partial exception to this).
For example, the IMF projects that G7 output in 2013 will be around 3% below the level at which inflation pressures build in the economy (the ‘potential’ level of output). Had the labour market been in a better state, then the scope for keeping monetary policy so loose would be much less in both the US and the Eurozone.
But it’s not all good news. As the economy has taken a longer time to recover in most advanced markets, workers have been unemployed for a longer period of time. Our analysis shows that, in 2012, an average out-of-work person in the OECD took around 10 months to find a job. This is significantly higher than the historic average of around 7 months.
The US seems to be one of the most vulnerable major economies to this change. In 1990, the average duration of US unemployment was 2.8 months. In 2012, it was three times higher. The delay in finding a job is projected to have a detrimental impact on the skills of those looking for jobs, which means that US-based companies will have to spend more resources than usual to train newly hired workers. In the short-term this could have a particularly adverse impact on labour intensive businesses.