The U.S. and global economies are trending toward recovery, but governments nevertheless must act "fast and decisively" to prevent the recession from turning into a long-term unemployment crisis that could last years, the Organization for Economic Cooperation and Development (OECD) has warned.
The unemployment rate of OECD countries -- basically the largest developed economies in the world -- hit a post-World War II high of 8.5 percent this summer. At the end of 2008, the OECD unemployment rate was 6.1 percent; 2007, 5.7 percent. The U.S. unemployment rate has risen to 9.7 percent, or nearly double the rate prior to the recession's start in December 2007.
"Employment is the bottom line of the current crisis. It is essential that governments focus on helping jobseekers in the months to come," OECD Secretary-General Angel Gurría said in the organization's 2009 employment outlook report. Read the full report by clicking here.
Gurría also argued for a coordinated policy response to the crisis and urged policy makers not to forget the plight of developing economies, many of which do not have well-designed social safety nets.
Gurría added that the unemployment rate is likely to rise next year in the 30-nation OECD, and to remain high "for the immediate future." The 8.5 percent OECD unemployment rate is the highest since the end of World War II and translates into an increase of 15 million unemployed persons since the end of 2007.
Unemployment rates by selected member states at the end of Q2, were as follows: U.S., 9.7 percent; Japan, 5.7 percent; United Kingdom, 7.7 percent (as of May 2009); Germany, 7.7 percent; France, 9.8 percent; Italy, 7.4 percent (as of March 2009); Spain, 18.5 percent; Greece, 8.7 percent (as of March 2009); Ireland, 12.5 percent; Canada, 8.6 percent; Mexico, 5.7 percent; South Korea, 3.8 percent; European Union, 9.0 percent; and the euro-zone, 9.5 percent.
Concern about a rise in structural unemployment following the pronounced recession has been voiced by economists and analysts nearly across the economic spectrum. Earlier this year, PIMCO's Bill Gross, who leads the world's largest bond fund, said the massive government intervention needed to stabilize financial markets will lead to a new era of 'capitalism with limits' that will feature lower return-on-equity, lower GDP growth, and smaller job creation.
In addition to bolstering social safety nets to prevent citizens from falling into traps of long-term unemployment and income loss, the OECD urges member nations to introduce policies to increase demand. These could include temporary cuts in employers' public national pension contributions and policies that provide incentives for firms to hire.
The OECD also urged nations to help young people, a group that's been especially hard hit by the crisis. It also asked member countries to increase spending on job training, job search assistance, and education so that citizens have the skills required for the new economy.
Economic Analysis: Another sobering forecast on job creation, but in the words of the late President John F. Kennedy, "I appreciate candor almost as much as I appreciate good news." Most government and think tank economists are aware of the unemployment problem and the enormous number of jobs that will need to be created in the years ahead. The task now, in the U.S., E.U., and Asia, is getting policy makers to work in tandem with business executives to cultivate those sectors that are most likely to be major sources of new jobs. In the U.S., it might be high-end manufacturing, health care services, information technology, biotech, and green technology. In Europe, it might be mass transportation technology and green cars; in Asia, nuclear power technology and low-end manufacturing.
OECD warns high unemployment could last years