Unemployment is going to be the big issue of the next couple of years — this will be a “jobs and social crisis” that will grip the world’s biggest economies, putting one in 10 workers out of a job, according to the OECD.
The world’s top 30 economies — including Australia — face an explosion of unemployment over next year, according to the Organisation of Economic Co-Operation and Development, which is releasing updated economic forecasts tonight for its member countries.
The forecasts will make uncomfortable reading, especially for those still in denial about the need for stimulatory packages. Overnight we got a taste of their big theme from the OECD’s boss, Angel Gurria, in a speech in Rome where he warned that unemployment will hit 10% across the 30 member countries in 2010.
There will be “practically with no exceptions.” The across-OECD unemployment rate will have risen from 5.6% in 2007, when the credit crunch erupted.
The surge in jobless numbers will come as the 30 advanced economies suffer what the OECD is now calculating to be a much bigger average contraction in growth, bigger than forecast by any other international agency.
The OECD believes the 30 big economies will contract by 4.3% this year, compared to the just released International Monetary Fund forecast of a 3%-3.5% contraction. 2010 will bring little or no growth.
“Our OECD projections indicate that the ongoing contraction in economic activity will worsen this year, before recovery gradually builds momentum through 2010. The uncertainties attached to this bleak outlook are exceptionally large, while the risks remain firmly inclined to the downside,” Mr Gurria said in his speech.
“And the job crisis is spreading rapidly around the world. The International Labour Organisation estimates that world-wide unemployment could increase by 40 million people by the end of this year.”
He warned that the ranks of the unemployed in the 30 advanced OECD countries would swell “by about 25m people, by far the largest and most rapid increase in OECD unemployment in the postwar period”.
The OECD chief said the misery of joblessness was “rapidly turning into a jobs and social crisis”.
Mr Gurría criticised the lack of focus on the unemployed in much of the debate over fiscal stimulus in the world; comments that will resonate here. The bad news is that globally these additional funds are rather limited, accounting for about 8 to 10 per cent of total expenditures in the United States and France and less in most of the other countries. This may turn into a missed opportunity.
The global economy is contracting. The credit squeeze, negative wealth effects (stemming from lower house and equity prices) and a generalized loss of confidence are dragging down economic activity everywhere. Trade flows are expected to fall by 9% in 2009.