High unemployment still most pressing legacy of crisis
The global recovery is firmly underway but taking place at different speeds across countries and regions, according to the Organisation for Economic Co-operation and Development (OECD).
Historically high unemployment remains among the most pressing legacies of the crisis, said the organization, and that should prompt countries to improve labour market policies that boost job creation and prevent today’s high joblessness from becoming permanent.
World gross domestic product (GDP) is projected to increase by 4.2 per cent this year and by 4.6 per cent in 2012. Across OECD countries, GDP is projected to rise by 2.3 per cent this year and by 2.8 per cent in 2012.
In the United States, activity is projected to rise by 2.6 per cent this year and by a further 3.1 per cent in 2012. Euro area growth is forecast at two per cent this year and next, while in Japan, GDP is expected to contract by 0.9 per cent in 2011 and expand by 2.2 per cent in 2012.
The recovery is becoming self-sustained, with trade and investment gradually replacing fiscal and monetary stimulus as the prinicipal drivers of economic growth. Confidence is increasing, which could add further buoyancy to private sector activity, said the OECD.
But there are downside risks, including: the possibility of further increases in oil and commodity prices, which could feed into core inflation; a stronger-than-projected slowdown in China; the unsettled fiscal situation in the U.S. and Japan; and renewed weakness in housing markets in many OECD countries, said the Economic Outlook. Financial vulnerabilities remain in the euro area, in spite of strong adjustment efforts underway in some countries.
“This is a delicate moment for the global economy and the crisis is not over until our economies are creating enough jobs again,” said OECD secretary-general Angel Gurría. “There is also some concern that if downside risks reinforce each other, their cumulative impact could weaken the recovery significantly, possibly triggering stagflation in some advanced economies.”
The top challenge facing countries continues to be widespread unemployment, which affects more than 50 million people in the OECD area. Governments must ensure employment services and training programs actually match the unemployed to jobs, said the report. They should also: rebalance employment protection towards temporary workers; consider reducing taxes on labour via targeted subsidies for low-paid jobs; and promote work-sharing arrangements that can minimize employment losses during downturns.
Stronger competition in retail trade and professional service sectors could also lead to greater job creation, and should be considered as part of wider structural reform programs in advanced and emerging economies alike, said the OECD.
