As a matter of habit, we all concern ourselves with the employment/unemployment situation in our home countries and pretty much ignore what happens elsewhere unless it happens to impact us directly. A recent report prepared for the G20 Labour and Employment Ministerial Meeting looks at the global employment picture and provides us with a glimpse of the outlook and key challenges that face global labour markets.
As we all know, persistent low growth rates in most of the world's Western economies are having a dampening effect on employment which, in turn, is having a dampening effect on the economy. The world's economy is caught in a cycle from which there is no easy escape. Just ask your friendly central banker. None of their usual monetary magic has been able to resuscitate the world's moribund economy. On top of the job creation issues, the jobs that are being created are of poor quality with real wages stagnating at levels that are resulting in even greater income inequality.
Over the past 12 months, most of the G20 economies have seen what can only be termed as modest reductions in their unemployment rate and in those nations where the unemployment rate has declined, the decline was often due to a shrinking labor force participation rate with the United States being a prime example as shown here:
In the United States, the current labour force participation rate is 62.8 percent, down from a high of 67.3 percent in 2001 and about the level that was seen in 1978.
As well, in nations like Spain, the United States, Italy and South Africa, long-term unemployment has increased. Here is a bar graph that shows the long-term unemployment rate in the fourth quarter of 2007 on the blue bars and the long-term unemployment rate in the first quarter of 2014 with a grey dot:
Among the G20 as a whole, the median of long-term unemployment as a percentage of total unemployment has risen from 24.6 percent at the end of 2007 to 30.2 percent in the first quarter of 2014, an increase of 22.8 percent.
Here is a chart showing the year-over-year changes in the labour markets of the G20 nations:
You'll notice that the situation for younger potential workers is dire; of the 20 nations, 6 have youth unemployment rates in excess of 20 percent with Spain coming in first place at 53.1 percent and South Africa coming in second at 52.5 percent. Here is a bar graph showing the unemployment rates for youth aged 15 and 16 to 24 years of age for 2007 in blue and the second quarter of 2014 in grey:
Here is a graph that shows the relationship between the growth in real GDP and the growth in total employment over the period from 2008 to 2013:
Notice the 45 degree line? That line marks the points where real GDP growth equals growth in total employment. In almost all G20 nations, real GDP has grown at rates in excess of the rate of growth of total employment, making this a relatively jobless recovery. You will also notice that the US economy has among the lowest real GDP growth and the lowest increase in total employment among its G20 peers.
This has resulted in a jobs gap among advanced G20 economies as you can see on this graph:
Had the world's economy continued along its growth pattern that was established prior to the Great Recession, it was projected that there would be about 480 million employed workers in the advanced G20 economies by 2014 as shown on the blue dashed line. Right now, there are only around 445 million employed workers, a jobs gap of 35 million. On top of the jobs gap in the G20 advanced economies, there is a jobs gap of around 40 million in the G20 emerging economies as shown on this graph:
As you noticed on the chart summarizing the labour market changes over the past year, employment rates vary widely by age. This graph shows the employment rate by age grouping and gender for all G20 nations:
The total share of the population that has found work varies widely across the G20, from 42 percent in South Africa to 75 percent in China with the United States coming in at 67 percent and Canada coming in at 72 percent.
It is obvious that central banks around the world have been completely incapable of creating sufficient high quality jobs to eliminate the jobs gap that has appeared since the beginning of the Great Recession. When potential workers have no means of support other than temporary government social programs, they cut back on consumption. In our consumption oriented economy, without that consumption, we can only expect that the world's economy will continue to grow at rates that are nowhere near what we experienced prior to 2008.