Full recovery in global labor market could take years
Summary
Split between rich and poor countries means global labor market will take years to heal, says UNIt will take at least two years before global unemployment falls back to pre-pandemic levels, according to fresh projections, with joblessness in poor countries remaining high even as labor markets in rich countries become increasingly tight.
The pandemic upended the global labor market, initially sending unemployment soaring around the world. A surge in demand following the reopening of rich economies such as the U.S. created huge disruptions in labor markets, as companies scrambled for workers. But at the same time, a lack of vaccines in many poor countries is keeping unemployment high.
The U.S. labor market is nearing, or may already be, at full employment, but a United Nations agency said Monday that is far from true in many other parts of the world, with the Omicron variant of the Covid-19 virus is likely stretching out the process of getting people back to work.
In new forecasts, the Geneva-based International Labor Organization said the number of hours worked globally will likely recover at half the pace it had previously projected for this year, with the number of unemployed workers falling to 207 million this year from 214 million last year, and to 203 million in 2023, still well above the 186 million recorded in 2019.
“Two years into this crisis, the outlook remains fragile and the path to recovery is slow and uncertain," said Guy Ryder, the ILO’s director-general.
The U.N. body said the weaker-than-expected recovery in employment was largely as a result of the spread of new variants of the Covid-19 virus, including Delta and the more recent Omicron, each of which have led to closures of parts of the global economy and in particular hindered the recovery of the tourism and international travel industries.
It also stressed the unbalanced nature of the recovery, with employment rebounding much faster in richer countries. In the U.S., the unemployment rate was 3.9% in December, and many economists believe the country is at or near a state of full employment, in which just about anyone who wants a job can get one.
Even in the eurozone, where employment recoveries have typically been slower than in the U.S., the unemployment rate was below its pre-pandemic level in November at 7.2%.
The ILO said that while rich countries account for just one-fifth of the global workforce, they will likely account for half of the world-wide decline in unemployment between the end of 2020 and the end of 2022. By 2023, it expects the number of unemployed in all rich countries to be back at its pre-pandemic level of 29 million. By contrast, it expects unemployment in developing countries to stand at 174 million, well above the 157 million recorded before the pandemic.
Since unemployed workers in developing countries have much less access to government help than their counterparts in rich nations, the ILO said the sluggish recovery in the global jobs market will lead to a rise in poverty. In its latest report on the global economic outlook, the World Bank last week said Covid-19 has led to a widening in the income gap between rich and poor countries, reversing the decline recorded over the two decades leading into the pandemic.
The ILO said rising energy and food prices have added to the difficulties faced by those who have lost their jobs in poor countries, but also warned that the rises in interest rates that many central banks have announced to rein in higher inflation could create additional problems.
Many economists believe those high rates of inflation are in part fueled by shortages of workers in particular sectors and locations.
The ILO said that in addition to the persistence of high unemployment in many countries, large numbers of people have left and not returned to the workforce. It estimates that the number of people in work or looking for employment as a share of the working-age population will be 1.1 percentage points lower in 2022 than it was in 2019.
The recovery has also been hindered by blockages in supply chains, with businesses in rich countries sometimes struggling to get their hands on the products their customers want. The ILO said that could have a long-lasting negative impact on employment in poor countries if businesses shift production closer to home.
“Intense and prolonged supply-chain shocks are creating uncertainty in the business climate and could lead to a reconfiguration of the geography of production, with significant implications for employment," the ILO said.
