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11 January 2010

There are some signs that the economy is pulling out of the crisis , but when we say that the economy is recovering, what exactly do we mean? That economic activity is on the increase? Markets are up? While these are sure signs that world economies are beginning to regain some ground, there is one indicator that has everyone concerned, and that is employment.

From a 25-year low at 5.6% in 2007, the OECD unemployment rate rose to a postwar high of 8.8% in October 2009, corresponding to an increase of nearly 18 million in the number of unemployed – and the most rapid and sizeable increase in unemployment ever recorded in the postwar period. The latest OECD projections (in the November 2009 Economic Outlook) suggest that the unemployment rate in the OECD area will peak at 9.1% in the second quarter of 2010, but remain at 8.6% even by the end of 2011. Taking into account increases in the working age population, it will take around 23 million jobs to get back to 2007 levels of employment.

Even if the economy rebounds relatively quickly, employment recovery could be slow. It took the US four or five years to reabsorb the sharp rises in unemployment following the 1970s oil shocks, and twice as long in Europe. There are fears that this time round, we could see a “jobless recovery” and that the increase in unemployment becomes structural as many of the unemployed drift into long-term joblessness or drop out of the labour force altogether. So it’s critical for governments to focus on building a “jobs rich recovery”. How can they do this?

In the short term, by offering partial unemployment benefits and allowing for flexible short-time working programs for workers faced with substantial earnings losses. These measures help companies and workers adjust to decreases in productivity without cutting jobs altogether. Job subsidies, recruitment incentives and public sector job creation schemes can also help tackle the worst impacts on employment, but after this damage limitation phase, it is essential to focus on helping people who have been laid off to avoid being left behind, through access to adequate benefits and employment services. The global economic crisis has accelerated changes in the job market, meaning that the demand for certain skills has also changed. So helping people re-train is also critical for employment.

Thanks to Stefano Scarpetta (OECD) for his contribution to this post.

Employment is the focus of the next chapter in From crisis to recovery, a new Insights book being previewed on this blog.

2 Responses leave one →
  1. Julie Harris permalink
    January 12, 2010

    With a further 85 000 jobs cut in the United States in December 2009, as announced by the US Dept of Labour on 8 January (, the US jobless rate is holding at 10% (higher than the OECD average). This being said, there is still room for hope (see

    The danger is that R&D budgets will be cut, among others, leading to less and less innovation in trying times. One hopes that we will instead continue to invest in jobs that create other jobs. That’s what technology jobs do. See:

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