Employment Prospects Beyond the Year 2010 - Term Paper Example

? Employment prospects beyond the year 19 June Economic Outlook The recession has proven to be resilient to an easy transition to a better economic outlook, and as the United Nations’ World economic situation and prospects 2011 stressed, the road after the recession will be “long, winding and rocky” (p.1). The year 2010 has shown a delicate and uneven economic growth recovery and several reports asserted that beyond 2010, there is a weaker global economic outlook (OECD Economic Outlook, 2010; United Nations, 2011). The main developed countries showed positive, but weak, economic growth rates and this poses problems and risks for the coming years (United Nations, 2011, p.1). The wide extent of policy actions applied by different governments during the beginning of the recession has helped stabilize financial markets and advance faster recovery, but there are still structural problems that should be conquered, and this happens to be the more challenging aspect of addressing systemic causes of the recession (United Nations, 2011, p.1). For instance, even when the banking sector made some progress in disposing some problematic assets, it is still susceptible to multiple risks. Those risks can further depreciate real estate markets, distress sovereign debt markets, and reinforce low credit growth (United Nations, 2011, p.1). Many developing countries and economies in transition, however, are demonstrating more positive signs of growth, since the third quarter of 2009 (United Nations, 2011, p.1). A strong economic rebound has been posted by emerging economies in Asia and Latin America, chiefly China, India and Brazil (United Nations, 2011, p.1). These countries mostly used policy buffers, such as sufficient fiscal space and foreign-exchange reserves, to generate “aggressive stimulus packages” (United Nations, 2011, p.1). These actions have facilitated domestic demand growth and have assisted a faster recovery from the global recession (United Nations, 2011, p.1). After 2009, low- and middle-income countries also contributed to the recovery of international trade, by leveraging ties among developing countries via international value chains (United Nations, 2011, p.1). Despite economic gains, they are not even enough to provide more positive economic prospects beyond 2010. Constant high levels of unemployment, with rising numbers of workers who lacked jobs for protracted periods, are holding back private consumption demand (United Nations, 2011, p.1). They also contribute to escalating housing foreclosures, which are adding to the frailty of the financial system (United Nations, 2011, p.1). High unemployment and underemployment also harm public finances too (United Nations, 2011, p.1). This paper will explore the employment prospects beyond 2010 for the United States, Europe, and Asia. Employment Prospects The financial fragility of global economic conditions has affected remunerative employment growth and the latter stands for the “weakest link in the recovery” (United Nations, 2011, p.10). From 2007 to the end of 2009, around 30 million lost their jobs due to the global financial crisis (United Nations, 2011, p.10). This figure is said to even underestimate the entire intensity of the job crisis, since it relies on official labor statistics, which for numerous developing countries, only make up the formal sector employment in urban areas, and so it indicates that there is unrecorded unemployed found in low-productivity and unofficial rural economic activities (United Nations, 2011, p.10). The economic output, especially for developed countries, remain below expected rates, and slow economic growth did not provide enough jobs to hire back all those who lost their jobs since the recession took place (United Nations, 2011, p.10). Furthermore, governments that continue to follow fiscal tightening, which comprises of tax hikes and spending cuts, only depreciate possibilities of greater employment growth rates (United Nations, 2011, p.10). Some developed economies, nevertheless, such as Australia and Germany, have seen a more positive and noticeable improvement in labor markets (United Nations, 2011, p.10). These employment rises are being “held” by some concern for the Euro and the unsettling condition of the Middle East, as well as the post-earthquake issues in Japan (Futureworkforum, 2011, p.1). Clearly, these disasters, currency exchange, and political stability factors impact employment prospects from 2010 onwards. In the United States, the labor market recovered somewhat in early 2010, only to waver again afterward, specifically as state and local Governments terminated some workers (United Nations, 2011, p.10). The unemployment rate may rise to 10 percent in early 2011, which is higher than 9.6 percent in the third quarter of 2010 (United Nations, 2011, p.10). Unemployment rate is around 10% since late 2009, and it is projected to fall slowly, because unemployment has reached its uppermost level since the early 1980s (OECD Economic Outlook, 2010, p.80). There remains a risk that high unemployment will be long-term unemployment. The OECD projects: “While this has not been a problem for the United States in the past, long-term unemployment currently far exceeds historical experience” (2010, p.81). One source provided the Employment outlook analysis second quarter 2011, and based on the seasonally adjusted Net Employment Outlook, the U.S. reached a +8% for the second quarter of this year, which is at the same level as in the previous quarter (Graph 1) (Futureworkforum, 2011, p.5). Though it is under the 12-13% level which the U.S. employment market has historically experienced, it signifies a more optimistic output (Futureworkforum, 2011, p.5). Graph 1: Net Employment Outlook, USA, % (seas. adj.) Source: Futureworkforum (2011, p.5) According to the Employment outlook analysis second quarter 2011, employers in all main sectors report had stated a net positive hiring intentions (Graph 2). The brightest outlook is in the “services and in manufacturing with a net employment outlook of +14% and a considerable improvement over the previous quarter” (Futureworkforum, 2011, p.5). The sectors with weak employment prospects are the education and public sectors, because they affected by government budget cutbacks (Futureworkforum, 2011, p.5). The private sector provided 192 thousand jobs in February and the number of unemployed almost fell by the same number (Futureworkforum, 2011, p.5). The advances are “real,” because the registered workforce also boosted by 60 in the same phase (Futureworkforum, 2011, p.5). The robustness of the positive outlook will be tested by current events in North Africa, the Middle East and Japan, since they will impact oil prices (Futureworkforum, 2011, p.5). Also, with the overtime hours going back to nearly 90 percent of the 2006 level, fresh hiring is expected by the second quarter (Futureworkforum, 2011, p.5). Graph 2: US employers' staffing plans national total, % Source: Futureworkforum (2011, p.5) Data for the United States designate that after each recession during the 1950s and 1960s showed that it took one year to pick up the jobs lost in the recession (United Nations, 2011, p.10). In the 1970s and 1980s, it took around one and two years, but after the recession of the early 1990s and after the 2001 dotcom crisis, the phase for job recovery extended to two and a half years or more (Graph 3) (United Nations, 2011, p.10). The Great Recession, however, made a faster growth of unemployment rate (United Nations, 2011, p.11). Several factors account for the sluggish recovery in the job markets of main developed economies. First, the speed of GDP growth in the recovery phase has become less and less vigorous after each business cycle (United Nations, 2011, p.11). Graph 3: Post-recession employment recovery in the United States, 1973, 1980, 1981, 1990, 2001 and 2007 Source: United Nations (2011, p.11) Second, quick technological progress, together with structural economic change, particularly in the structure of a slighter share of manufacturing and a larger share of services in the economy, elucidate why wholly cyclical movements have become less significant than structural factors in identifying the upward and downward cycles in developed economies (United Nations, 2011, p.11). In previous business cycle episodes, workers who become unemployed during the recession would, for the majority, be able to recover employment comparatively rapidly during the improvement in the same sector, if not the same company, in which they had been working (United Nations, 2011, p.11). At present, however, increasing job losses during the downturn tend to become enduring, which compels the unemployed to discover jobs in other sectors during the recovery (United Nations, 2011, p.11). This frequently means workers have to obtain different skills, and ones that are exceedingly dependent upon the expansion of new industrial sectors in the economy (United Nations, 2011, p.11). Additionally, the account of financial crises proposes that when a recession is produced or takes place with a banking crisis, the revival of output, employment and real wages is much more long-drawn-out (United Nations, 2011, p.11). The longer term employment upshots of the current crisis are now becoming noticeable. Workers have been without a job for a longer time than before, and in some countries youth unemployment has reached upsetting levels (United Nations, 2011, p.11). The percentage of the long-term unemployed has increased considerably in most developed countries since 2007 (United Nations, 2011, p.11). In the United States, for example, the percentage of workers who have been unemployed for 27 weeks or more has been growing at an alarming tempo during 2010; about half of the workers without a job are currently in that position (United Nations, 2011, p.11). The situation is just as troublesome in countless European countries (United Nations, 2011, p.11). In Europe, even as Germany’s job market showed signs of growth, the average unemployment rate has sustained its movement upwards, and it already attained 10.1 per cent in 2010, an increase of 7.5 per cent before the crisis (United Nations, 2011, p.10). In the United Kingdom, the post-crisis unemployment rate has broken just underneath eight percent and the employment rate at 70.5 percent (Futureworkforum, 2011, p.6). Also, since employers hesitant to hire employees on fulltime, part-time and temporary jobs have been rising (Futureworkforum, 2011, p.6). For the first time, ever since the middle of 2009 both temporary jobs and part-time jobs has reduced in the November 2010 to January 2011 period while there is no significant rise yet in full-time jobs (Futureworkforum, 2011, p.6). The numbers of employers that seek to hire linger at the same level as in the previous quarter (Graph 4). Graph 4: UK employers' staffing plans, national total % Source: Futureworkforum (2011, p.6) The UK labor market responded swiftly to the economic downturn by dropping jobs, which incited a policy debate about the hazards of a services-centered economy (Futureworkforum, 2011, p.6). The service sector is, nevertheless, increasing its hiring plans, as it is buoyed up with better performance (Futureworkforum, 2011, p.6). The slow labor market in the second quarter is the result of public sector slashes (Futureworkforum, 2011, p.6). The positive employment viewpoint in the manufacturing sector and the increase of hiring in the services sector is expected to continue (Futureworkforum, 2011, p.6). It may not be enough to offset the slower employment demand in other sectors (Futureworkforum, 2011, p.6). As a result, the “seasonally adjusted Net Employment Outlook of two percent (Graph 5) for the second quarter of this year remains at the same level as in the previous quarter” (Futureworkforum, 2011, p.6). Also, according to the Manpower’s Employment Outlook Survey, in general, the trends over the past quarters can carry on through the second quarter (Futureworkforum, 2011, p.6). Graph 5: UK employers' staffing plans, national total % Source: Futureworkforum (2011, p.6) In Spain, the unemployment rate increased twice fold to 20.5 per cent (United Nations, 2011, p.10). Unemployment also increased radically in Ireland, where it attained 14.9 per cent in 2010, and in other countries in the region (United Nations, 2011, p.10). In France, unemployment follows the average in the euro area (United Nations, 2011, p.10). Employment outlook in Europe is expected to improve, but at a “snail’s pace” (United Nations, 2011, p.10). In Germany, the unemployment rate went below eight percent and continues to fall. The employers’ confidence stays optimistic in the second quarter of the coming year (Futureworkforum, 2011, p.7). Contrasted to the previous quarter, the employment outlook has improved a great deal (Futureworkforum, 2011, p.7). Many employers plan to boost staff than the numbers of employers who plan seek to decrease staff (Graph 6). While somewhat down from the preceding quarter, the seasonally adjusted net employment outlook stays strong at an optimistic level of eight percent (Futureworkforum, 2011, p.7). Graph 6: German employers' staffing plans, national total % Source: Futureworkforum (2011, p.7) All non-farm sectors in Germany are indicating positive hiring intentions (Futureworkforum, 2011, p.7). The finance and business services sector and the transport, storage and communications sector placed the most robust employment outlook, at a seasonally adjusted increase of 11 and positive 17 percent correspondingly (Futureworkforum, 2011, p.7). The foundations of the viewpoint are the vigor of the global export markets (Futureworkforum, 2011, p.7). Whereas 60 percent of Germany’s exports depart toward other EU countries, the strongest growth is its exports to China (Futureworkforum, 2011, p.7). Due to the demand for German exports, the un- and underemployment has slowed down and the prospective for new hiring has improved (Futureworkforum, 2011, p.7). Still, the probability of a taut labor market may increase, because vacant jobs continue to grow, which is attributed to skill shortages (Futureworkforum, 2011, p.7). In Japan, the development in the labor market was insignificant during 2010, with the unemployment rate projected to stay above 5 per cent in 2011 (United Nations, 2011, p.10). A “jobless” recovery is possible, as the situation faced in developed countries, and it is “not uncommon in the recent history of the business cycle” (United Nations, 2011, p.10). It is approximated that the employment levels will take longer to recover to pre-recession levels (United Nations, 2011, p.10). In China, employment prospects are up for the manufacturing sectors and will continue beyond 2010 (Raynaud & Watkins, 2011). A survey showed, however, that “nearly every executive in China identifies failure to attract top candidates to their company as a major obstacle to meeting the company’s business goals” (Raynaud & Watkins, 2011, p.23). This signifies lack of prospective talent in filling up positions of management in Chinese firms, and it indicates high demand for management and junior management levels. Unemployment and underemployment rates are increasing among young people (15 to 24 years of age), both in developed and developing areas (United Nations, 2011, p.12). When 2009 ended, there were around 81 million unemployed young people, while the pace of global youth unemployment was 13.0 per cent, which increased by 0.9 percentage points from 2008 (United Nations, 2011, p.12). This corresponds to a rise in unemployment rates among the youth compared with the 0.6 percentage point increase observed in the rate of youth unemployment between 1998 and 2008 (United Nations, 2011, p.12). Constant high unemployment, dormant or declining real wages and restrained output recovery can push the economy into a ferocious circle and ensnare it in a lengthened duration of below-potential growth, or, in several instances, it may even produce a “double-dip recession” (United Nations, 2011, p.12). As the UN reported: “High unemployment and lower real wages will constrain the recovery in household consumption, which in turn will drag output growth; below-potential output growth will, for its part, constrain employment growth” and it added: “The longer this vicious circle lasts, the higher the risk of “cyclical” unemployment becoming “structural”, thereby impairing potential growth of the economy in the longer run” (United Nations, 2011, p.12). This indicates that the longer that the youth will remain unemployed, the more they will jeopardize future employment prospects in 2010 and beyond. Workers in developing countries and economies in transition have been harshly affected by the downturn too, though the effect in terms of job losses became visible later and was much more short-lived than in developed countries (United Nations, 2011, p.12). Majority of the job losses happed in export sectors and were furthermost during the last quarter of 2008 and the first quarter of 2009 when global trade declined (United Nations, 2011, p.12). With the revival in production, employment also in many developing countries and economies in transition is expected to improve in 2010 and beyond (United Nations, 2011, p.12). Improvements in employment conditions are also obvious in some countries, including Belarus, the Russian Federation and Kazakhstan (United Nations, 2011, p.12). In East Asia, the strong economic growth in the first half of 2010 has reduced unemployment rates (United Nations, 2011, p.12). Job growth is highest for manufacturing, construction and services sectors (United Nations, 2011, p.12). As the first quarter of 2010 ended, unemployment rates had already went back to the pre-crisis levels in the majority of East Asian economies (United Nations, 2011, p.12). Employment levels were also restored to pre-crisis levels by the first quarter of 2010 in several developing countries, including Argentina, Brazil, Chile, Colombia, Egypt, Mexico, Peru, the Philippines and Turkey (United Nations, 2011, p.12). Despite this ricochet in employment in parts of the world during 2010, the global economy would require to produce at “least another 22 million new jobs in order to return to the pre-crisis level of global employment” (United Nations, 2011, p.12). At the present speed of the recovery, this would take at least five years, based on the estimates of the International Labor Organization (ILO). Edward Gordon (2009) reported the gap between the unemployed and the range of skills needed in the future. Present data demonstrate that 62% of all U.S. jobs are high-paying and necessitate higher skill levels (Gordon, 2009, p.38). Ninety-seven million people are in demand, yet only 45 million Americans will be eligible for such positions (Gordon, 2009, p.38). Businesses will aim to respond to the difference by using the weakening talent safety valves of outsourcing and H-1B visas to import skilled workers (Gordon, 2009, p.38). By 2020, the labor market will be more uneven. Gordon stressed: “Indications are that 74% of all jobs will be high-pay/high-skill, with 123 million people needed, but only 50 million Americans are expected to be qualified for them” (p.38), while he added that “only 44 million people will be needed, but if current trends continue, more than 150 million Americans could fall into this category of low job skill readiness” (p.38). Conclusion Even as economies showed signs of improvement, employers in the US and Europe have been unwilling to add greater numbers to payrolls to offset the unemployed during the recession. Post-crisis problems continue to affect employers in the US and Europe, although hiring intentions are positive in 2011 than in 2010. For developing economies, there is high demand in manufacturing and services sectors, which predominantly consisted of the commonly outsourced jobs. Some of the main issues of employment are the employment of the youth and the increasing demand of different skills and knowledge that many unemployed do not have. References Futureworkforum. (2011). Employment outlook analysis second quarter 2011. Retrieved from http://www.futureworkforum.com/PDFs/Employment_Outlook_Analysis_Caden_2q11.pdf Gordon, E. (2009). The global talent crisis. Futurist, 43 (5), 34-39. Raynaud, C. & Watkins, C. (2011). New talent outlook. China Business Review, 38 (2), 20-24. OECD Economic Outlook. (2010, May). Developments in individual member countries. OECD Economic Outlook, 1 (87), 77-189. Pacurar, I. S. & Walker, J.K. (2011). World economic outlook for 2011. Business Perspectives, 20 (4), 22-31. United Nations. (2011). World economic situation and prospects 2011. Retrieved from http://www.un.org/en/development/desa/policy/wesp/wesp_current/2011wesp.pdf Read More