Typical street scene in Santa Ana, El Salvador. (Photo: iStock)

Typical street scene in Santa Ana, El Salvador. (Photo: iStock)

IMF Survey: Sharp Rise in Unemployment from Global Recession

September 2, 2010

  • Conference to address jump in unemployment, long-term effects
  • More than 440 million new jobs needed over next 10 years
  • In near term, fiscal and monetary policies should support recovery and job creation

The global financial crisis has sharply increased unemployment across the world to more than 210 million people, an increase of over 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 says.

Sharp Rise in Unemployment from Global Recession

Job line in New York, United States: in many advanced economies, unemployment remains at high levels (photo: Frances Roberts/Newscom)


The International Monetary Fund and the International Labour Organization (ILO) issued the stark assessment of the outlook for employment in the wake of the global financial crisis, saying that the world faces major challenges in creating enough quality jobs to sustain growth and development.

The two organizations issued a background document ahead of a joint high-level IMF-ILO conference on September 13 in Oslo, hosted by Norwegian Prime Minister Jens Stoltenberg, to explore new ways of forging a sustainable, job-rich economic recovery. The one-day conference on “The Challenges of Growth, Employment and Social Cohesion” will bring together political, labor, and business leaders, as well as leading academics.

In many advanced economies, unemployment remains at very high levels, with little sign of an early fall, while in emerging and developing countries the economic shock hit jobs in export sectors hard, but these are now recovering, in part as exporters have diversified their markets to rely less on those of the advanced economies.

The 2007–09 slowdown also hit the large informal economies of 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.

Painful legacy

Lead speakers at the conference include President Ellen Johnson Sirleaf of Liberia, Prime Minister George Papandreou of Greece, Prime Minister José Luis Rodríguez Zapatero of Spain, Finance Minister Christine Lagarde of France, U.K. Secretary of State for Labor Iain Duncan Smith, and International Trade Union Confederation General Secretary Sharan Burrow. The conference will be chaired by IMF Managing Director Dominique Strauss-Kahn and ILO Director General Juan Somavia.

“The Great Recession has created a painful legacy of unemployment,” said Strauss-Kahn, “and this devastation threatens the livelihood, security, and dignity of millions of people across the world. The international community must rise to meet this challenge. Now is the time for our collective action.”

The unemployment rate has increased by 3 percentage points in advanced countries since 2007 and by a ¼ percentage point in emerging markets. Within the 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, in Germany and Norway, the unemployment rate barely budged.

Youth (ages 15–24) currently represent one-quarter of the world’s labor force, at 619 million. Despite a number of years of rapid economic growth, youth unemployment has remained stubbornly high, rising to 13 per cent in 2009, or 81 million.

If the effects of past recessions are any guide, the cost to those who become unemployed could be a persistent loss in earnings, reduced life expectancy, and lower academic achievement and earnings for their children. And unemployment is likely to affect attitudes in a manner that reduces social cohesion, a cost that all will bear.

Evolving three-part strategy

The IMF said that, to their credit, most countries mounted a strong three-part policy response to try to minimize these 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, in response to the crisis, mechanisms to stimulate labor demand were widely used in many advanced countries. In particular, subsidies (direct job subsidies, wage subsidies, or reductions in payroll taxes) were targeted at specific groups in the labor force that are most vulnerable to joblessness: the long-term unemployed and/or youth.

Over the remainder of 2010 and throughout 2011, the IMF says fiscal policy should remain supportive of recovery. But clearly, the room for public spending varies across countries, and the three-part strategy should be adapted to country budgets and specific circumstances.

More jobs needed

In the 10 years to 2009, global employment grew from 2.74 billion to 3.21 billion, with well over half of the world’s workers (56.3 per cent) located in Asia. Global unemployment, which had been over 6 percent for several years before decreasing between 2004 and 2007, increased dramatically in 2009. Now in 2010, around 210 million are unemployed—a rise of over 30 million since 2007.

With annual labor force growth of 1.6 per cent adding more than 45 million job seekers per year to the global labor force, the challenges exacerbated by the crisis are unlikely to diminish. 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. In addition, developing countries need to grow rapidly to absorb their expanding labor force and to meet the demand for jobs from migrants leaving rural areas.