WORLD ECONOMIC OUTLOOK: TENSIONS FROM THE TWO-SPEED RECOVERY
Figure 1.19. Unemployment1 Unemployment remains above precrisis levels in many economies, including the United States. Globally, unemployment is expected to average about 6 percent this year, with rates ranging from 4 percent in east Asia to 10 percent in the Middle East. Unemployment rates are projected to be lower in regions where growth was higher last year. Youth unemployment remains high, at 25 percent in the Middle East and between 15 and 20 percent elsewhere. Employment-to-population ratios are low in many regions suggesting that many people are being forced into the informal sector.
Unemployment (latest unemployment rate minus six-year average before the crisis)
6 4 2
while fundamental reforms to boost consumption are being put in place. But unless fiscal adjustment soon starts in earnest in the United States, the exchange rate of the renminbi becomes more market-determined, currencies of other emerging surplus economies appreciate, and various European and emerging economies implement ambitious structural reforms, little progress will be made with respect to global demand rebalancing, and the recovery will stand on increasingly hollow legs over the medium term.20
0 -2 -4 -6 AU CA FR DE IT JP KR GB US AR BR CN ID MX RU ZA TR EU
Ratio of Unemployment Rate, by Region (2011), to Annual Real GDP 12 Rate, by Region (2010) ME NAF 10 DEEU CEECIS 8 SSA LAC
Projected Unemployment Rate, by Region, 2011 12 (percent) 10 8 6
6 EAS
SEAP
4
SAS
2
4
EAS
SAS
LAC
SEAP
SSA
DEEU
CEECIS
ME
2 NAF
0
-8
0
2
4
6
8
0 12
10
Employment-to-Population Ratio, 80 2010 70
35 Youth Unemployment in Major Regions 2010 30 (percent) 2000
60
25
50
20
40 15
30
10
20
ME
NAF
DEEU
CEECIS
LAC
SAS
SSA
EAS
SEAP
EAS
SAS
SSA
SEAP
LAC
DEEU
CEECIS
0
ME
10
0
NAF
5
Sources: Haver Analytics; International Labor Organization; and IMF staff estimates. 1AR: Argentina; AU: Australia; BR: Brazil; CA: Canada; CEECIS: central and southeastern
Europe (non-EU) and Commonwealth of Independent States; CN: China; DE: Germany; DEEU: developed economies and European Union; EAS: east Asia; EU: euro area; FR: France; GB: United Kingdom; ID: Indonesia; IT: Italy; JP: Japan; KR: Korea; LAC: Latin America and the Caribbean; ME: Middle East; MX: Mexico; NAF: north Africa; RU: Russia; SAS: south Asia; SEAP: southeast Asia and the Pacific; SSA: sub-Saharan Africa; TR: Turkey; US: United States; ZA: South Africa.
26
International Monetary Fund | April 2011
Unemployment Needs to Be Reduced Unemployment poses grave economic and social challenges, which are being amplified in emerging and developing economies by high food prices (Figure 1.19). The young face particular difficulties. Historically, for Organization for Economic Cooperation and Development countries the unemployment rate for young people ages 15 to 24 has been about two and a half times the rate for other groups. Though youth unemployment typically increases sharply during recessions, the increase this time was greater than in the past: in a set of eight countries for which long time-series of youth unemployment are available, the increase averaged 6½ percentage points during the Great Recession, compared with 4 percentage points in previous recessions. The three lines of defense against unemployment are supportive macroeconomic policies, financial sector repair, and specific labor market measures. Monetary policy is expected to stay easy in advanced economies. However, there is an urgent need to accelerate bank restructuring and recapitalization to relaunch credit to small and medium-size firms, which account for the bulk of employment. Temporary employment subsidies targeted at these firms could help restart hiring. Such programs may subsidize the hiring of many workers who would have found jobs anyway or cause replacement of those currently employed with the targeted group of unemployed.21 However, to the extent that subsidies flow to small and medium-size firms, they may at 20For a full-fledged scenario to illustrate the benefits of joint policy action along these lines, see Group of Twenty (2010). 21See Chapter 3 of the April 2010 World Economic Outlook.