Employment policies and data

Impact of the economic crisis on employment and unemployment in the OECD countries


The OECD area economy has entered recession and labour market conditions are rapidly deteriorating in many countries, according to the latest issue of the OECD Economic Outlook (No. 84, November 2008). OECD projections indicate that the average unemployment rate in the OECD area may reach 6.3% in the last quarter of 2008, from 5.5% a year earlier. The unemployment rate is projected to increase further in the next 18 months and peak at 7.3% in the second quarter of 2010. Overall, these projections suggest an increase in the number of unemployed persons in the OECD area from 34 million in 2008 to 42.1 million in 2010 – the most rapid rise in OECD unemployment since the early 1990s.

Recent trends and the projections over the next two years point to significant differences across OECD countries. The downturn in economic activity took effect earlier in the United States, where the unemployment rate reached 6.5% in October and the rate of job losses in consecutive months hit a seven-year high. Over the past 12 months, the number of unemployed persons has increased by about 2.8 million in the United States.

In the EU-15, unemployment is also rising, albeit at a slower pace. But in Ireland and Spain unemployment rose significantly in 2008, as a result of a sharp fall in house building leading to major job losses in the sector, while France and especially Germany have not yet seen a sizeable increase in the number of unemployed. Employment is falling in Japan, with the unemployment rate heading up since the beginning of the year, albeit from low levels.


Stefano Scarpetta, head of OECD's Employment Division, talks about the effects of the financial crisis on jobs

Going forward, job losses are projected to become more widespread across the OECD area in 2009 and employment growth  should only resume in 2010. Thus, by the end of 2009, the unemployment rate is expected to be at least 2 percentage points higher than at the end of 2007 in six OECD countries (the United States, the United Kingdom, Iceland, Ireland, New Zealand and Spain) and between 1-2 percentage points higher in nine other countries, including France, Italy, Canada and Australia.

Historical experience suggests that youth, immigrants, low-skilled and older workers are more likely to bear the brunt of rising unemployment. Workers holding temporary contracts are also particularly vulnerable to an economic downturn. For example, temporary employment fell by more than 8% in the year up to the 3rd quarter of 2008 in Spain, and employment in temporary work agencies fell by 10% over the same period in France.

The slowdown is also disproportionately affecting workers in certain industries. As noted above, construction is among the most affected sectors in countries such as Ireland and Spain, where there had been a large boom in residential construction in response to sharply rising housing prices. In Ireland, employment in construction had already fallen by 6% in the year up to the second quarter of 2008, even before there was any decline in total employment. Many banks and other financial institutions have also announced large layoffs.

However, job losses are spreading to sectors that were not directly implicated in the housing bubble and associated crises in financial markets. For example, automobiles is among the sectors the most affected in many countries, because sales have fallen sharply in response to declining consumer confidence and toughening terms for consumer credit. Employment in the US auto sector in October was down almost 14% over the previous year, as compared to a decline of a little less than 1% in overall employment. And recent announcements also suggest significant job losses in the European auto sector in the months to come. For further information please contact Stefano Scarpetta, Head of the Employment Analysis and Policy Division, or tel: +33 1 45 24 19 88





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