IMF Survey: Sharp Rise in Unemployment from Global Recession

IMF News, September 2, 2010

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The global financial crisis has sharply increased unemployment across the world to more than 210 million people, up 30 million since 2007, hitting advanced economies especially hard and having long-term social repercussions, including on health and the children of those laid off.
The IMF and the International Labour Organization (ILO) issued a background document ahead of a joint high-level IMF-ILO conference on September 13 in Oslo to explore ways of forging a sustainable, job-rich economic recovery.

Global unemployment now around 210 million—a rise of over 30 million since 2007.
The unemployment rate has increased by 3 percentage points in advanced countries since 2007 and by a ¼ percentage point in emerging markets.
Within advanced economies, some of the largest increases in the unemployment rate have occurred in Spain—where the rate increased by nearly 10 percentage points—the United States, and New Zealand; in contrast, Germany and Norway saw the unemployment rate barely budge.
In the 10 years to 2009, global employment grew from 2.74 billion to 3.21 billion.
Well over half of the world’s workers (56.3 per cent) are located in Asia.
Youth (ages 15–24) represent one-quarter of the world’s labor force, at 619 million.
Youth unemployment rose to 13 per cent in 2009, or 81 million.
Annual labor force growth of 1.6 per cent is adding more than 45 million job seekers per year to the global labor force.
In the next 10 years, more than 440 million new jobs will be needed to absorb new entrants into the labor force, and still more to reverse the unemployment caused by the crisis.

The crisis hit jobs in export sectors of emerging and developing countries hard; these are recovering in part as exporters diversify markets away from advanced economies.
The 2007–09 slowdown also hit large informal economies in the developing world; informal employment has increased, and the numbers of working women and men who cannot earn enough to keep themselves and their families out of poverty have risen.
If effects of past recessions are any guide, costs to those who become unemployed could include:
- Persistent loss in earnings.
- Reduced life expectancy.
- Lower academic achievement and earnings for their children.
- Reduced social cohesion due to changed attitudes, imposing a broader social cost.

The IMF notes most countries mounted a strong three-part policy response to minimize costs:
- To support aggregate demand through monetary and fiscal policy actions.
- To ease the pain in labor markets through short-term work programs and provision of unemployment insurance benefits.
- To accelerate jobs recovery through the provision of subsidies of various kinds.
In 2009, mechanisms to stimulate labor demand were widely used in many advanced countries, including direct job subsidies, wage subsidies, or reductions in payroll taxes targeted at the long-term unemployed and/or youth.
The IMF recommends that over the remainder of 2010 and throughout 2011 fiscal policy should remain supportive of recovery, while noting that the room for public spending varies across countries and the three-part strategy should be adapted to country budgets and specific circumstances.
Developing countries need to grow rapidly to absorb expanding labor forces and to meet the demand for jobs from migrants leaving rural areas.

IMF Survey: Sharp Rise in Unemployment from Global Recession