Global Employment Update: Rebalancing Will Redistribute Unemployment
The global labour market has been one of the biggest casualties of the financial crisis, with heavily indebted developed economies struggling to chip away at high unemployment. Although economic recovery is underway in the US, UK and soon the eurozone, growth is not sufficiently strong to generate enough employment to drag down perniciously high joblessness. Moreover, in some cases such as the UK where there are net employment gains, concomitant growth in the labour force from natural population change and migration has made it further difficult to bring down unemployment. Even in the US, which is the furthest along the road to recovery among the major deficit states, the labour market has been left ravaged by the financial crisis.
The chart above shows the most recent data that we have for total employment in the largest developed states. Although unemployment has increased sharply in the eurozone over the last few years, the total stock of employment has fared somewhat better. Indeed, since the beginning of 2008, total employment has fallen by 3% while the stock of unemployed has increased by 67%. This is likely the result of unemployment disproportionately affecting younger workers that were just joining the labour force. Meanwhile, tough labour laws make it difficult to fire existing employees in many eurozone member states, further putting the burden of unemployment on younger workers. In the US, where the labour market is far more flexible, total employment has been severely hit by the recession, but has been in recovery since early 2010 and is close to returning to 2007 levels.
Labour force participation rates tell a similar story. Across much of Europe, participation rates have been reasonably flat during the post-crisis period, with a significant rise in Germany being the most obvious outlier. Meanwhile, the participant rate in the US fell sharply after the financial crisis, although this is part of a longer running trend which has been in place since 2001. The most recent data published by the OECD, which provides quarterly data and forecasts for the remainder of 2013, suggest that the participation rate is recovering. However, the latest data from the Bureau of Labour Statistics show a continued decline to 63.4% in July from 66.2% at the beginning of 2008.
|Still In Recovery Mode|
|Global - Employment Index, January 2007=100|