The world’s workers are reeling from the initial shock of the coronavirus recession, with job losses and welfare claims around the globe already running into the millions this week.
With International Monetary Fund Managing Director
“We see unemployment rates in the U.S. and Europe getting up well up into the teens,”
Rising unemployment will intensify pressure on governments and central banks to speed delivery of programs to either compensate workers who are made redundant, or try to persuade employers to hoard staff until the virus fades.
Failure would risk an even deeper recession or weak recovery that would require policy makers to consider yet more stimulus on top of that already deployed. The International Labor Organization last month warned almost 25 million jobs will be lost if the virus isn’t controlled.
At JPMorgan Chase & Co., economists predict their measure of unemployment in developed markets will jump by 2.7 percentage points by the middle of this year, having started this year around its lowest in four decades. While there will be some healing as economies recover, they still predict elevated unemployment of 4.6% in the U.S. and 8.3% in the euro area by the end of 2021.
The shock to labor markets also marks a stress test for different social models. The U.S.’s more flexible culture means more will lose their jobs than in the euro area or Japan, where there is a greater onus on retaining staff during a shock.
A first glimpse of the U.S. devastation was apparent in its monthly labor report on Friday, showing employment fell last month for the first time in a decade. Payrolls slumped by more than 700,000, seven times as much as economists had forecast. Those figures are all the more worrying because they cover only the start of the labor-market damage in early March, prior to the biggest rounds of layoffs and closures.
A greater hit is coming therefore, not least since the number of Americans applying for unemployment benefits soared to a record 6.65 million last week, more than twice the record set in the prior week. The 9.96 million combined claims of those two weeks is equivalent to the total in the first 6 1/2 months of the 2007-2009 recession.
Goldman Sachs Group Inc. this week predicted unemployment there will soon spike to a record 15%.
In Europe, a report showed almost one million Britons applied for welfare payments in the space of two weeks, 10 times the normal amount. The country’s statistics office released a survey of businesses where 27% of them are reducing staff levels in the short term.
There was also a record jobless-claims surge in Spain, whose nearly
While German unemployment barely rose in March, like the U.S. report, that data was based on a cut-off date before most shutdown measures took effect. But
French businesses have also rushed to benefit from government aid to keep workers on their payroll, while getting paid 84% of their salary by the state. As of Thursday,
Nordic data already shows the region is suffering a major employment shock, with more than 800,000 people out of work there, including in excess of 620,000 on temporary furloughs in Finland and Norway, according to calculations by Bloomberg.
In Asia, Japanese unemployment held at 2.4% in February, but there’s been a sharp drop in the ratio of available positions to the lowest level in three years. More recent developments showed a rapid taking up of emergency loans via a government program for people who have lost their jobs or face wage cuts.
Almost 23 million, or a third of Thailand’s population,
Much focus will fall on China, whose economy is returning toward full capacity. Its rate of surveyed urban unemployment jumped to a record 6.2% in February as business shut down. Those interruptions threw an estimated 8 million people out of work, according to economists at Australia & New Zealand Banking Group.
As eye-watering as this phase of the global economic crisis may already be, Peter Hooper at Deutsche Bank says the outlook won’t seem as bleak when the virus outbreak ceases and demand rebounds.
“You should see a fairly quick drop from these very lofty levels of unemployment,” he said.
(Adds IMF comment in second paragraph)
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