Jobs and Growth: Can’t Have One Without the Other?
IMF Blog, April 30, 2012
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Bibliographic details
- Authors: Min Zhu
- Published: April 30, 2012
Key findings
- The IMF’s latest World Economic Outlook projects global growth of 3 ½ percent this year.
- Five years after the onset of the Great Recession, 16 million more people are likely to remain unemployed this year than in 2007.
- The bulk of this increase in unemployed people has been in the so-called advanced economies (the IMF’s term for countries with high per capita incomes).
- The average unemployment rate in these economies is expected to 7 ¾ percent.
- Several populous economies such as the United States, France, the United Kingdom are at or above this average.
Employment trends and country examples
- Countries where GDP is expected to decline in 2012 and unemployment is expected to increase include: Cyprus, Greece, Italy, the Netherlands, and Spain.
- Countries where GDP is expected to grow in 2012 and unemployment rates are expected to decline include: Iceland, New Zealand, and the United States.
- While some declines are welcome, unemployment rates are still expected to remain high in most advanced economies this year.
Growth–unemployment relationship
- The jobs picture remains grim primarily because the growth picture is weak.
- Chart evidence (described) shows that for advanced economies the change in unemployment rates expected between 2011 and 2012 correlates with the IMF’s forecasts for growth in 2012: negative or weak GDP growth corresponds with rising unemployment; positive GDP growth corresponds with falling unemployment.
Policy response — priorities and short-term measures
- The IMF emphasized that “the highest priority, but also the most difficult to achieve, is to durably increase growth in advanced economies, and especially in Europe.”
- To solidify the weak recovery and contain downside risks, policies must be strengthened.
- Short-term policy measures recommended:
- more efforts to address the euro crisis;
- a temperate approach to fiscal restraint in response to weaker activity;
- a continuation of the very accommodative monetary policies; and
- ample liquidity to the financial sector.
Source: Min Zhu, “Jobs and Growth: Can’t Have One Without the Other?,” April 30, 2012.
Content in this bundle
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