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U.N. Agency Warns of Rising Unemployment

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U.N. Agency Warns of Rising Unemployment

unemploymentBy David Jolly- New York Times

More than 197 million people worldwide are jobless, and an additional 39 million have simply given up looking for work, a United Nations agency said on Monday, warning that government budget-balancing was hurting employment and would probably lead to more job losses soon.

With global growth stalling five years after the financial crisis upended much of the world economy, the number of jobless is expected to rise by 5.1 million this year, to more than 202 million, the International Labor Organization said in a special report. And it predicted there would be a further three million newly jobless people next year.

High unemployment rates in the developed world — 7.8 percent in the United States, 11.8 percent in the euro zone — weigh on demand and hold back economic growth. Global gross domestic product will probably expand about 3.6 percent this year, the International Monetary Fund said in October, below its previous forecast.

Addressing the issue of unemployment last Thursday, the I.M.F.’s managing director, Christine Lagarde, urged governments to focus on “growth that can actually deliver jobs.”

“We stopped the collapse,” Ms. Lagarde said during a news conference in Washington, warning about the risks to growth posed by complacency in Europe and difficult budget negotiations in the United States. “We should avoid the relapse, and it’s not time to relax.”

The International Labor Organization found that macroeconomic imbalances “have been passed on to the labor market to a significant degree.” With aggregate demand weakening, employment “has been further hit by fiscal austerity programs in a number of countries, which often involved direct cutbacks in employment and wages, directly impacting labor markets.”

More troubling, it said, was that while governments had sought to counter the effects of the financial crisis with fiscal stimulus, later austerity measures in some countries appeared to be reinforcing the downturn.

The effects of the recession in Europe are being felt elsewhere through “a spillover effect,” the organization found, mostly through the mechanism of reduced demand for foreign goods, but also in the form of volatile capital inflows in places like Latin America and the Caribbean. These forces have left policy makers with difficult choices about how to keep soaring currencies in check without strangling economic growth.

The agency said that it was common for the rate of job creation to be slow after a financial crisis, but that there had been “a short-lived respite” for developed countries beginning in 2010. That period has now ended, and once again “further job restructuring is likely before a stronger rebound can be expected in labor markets.”

More people were simply leaving the job market altogether, particularly in the developed world, with labor force participation rates falling “dramatically,” it said, “masking the true extent of the jobs crisis.”

The ratio of employment-to-population ratio has fallen as much as four percentage points or more in some areas, it noted, and even where jobless rates have eased, the participation rate “has not yet recovered.”

The labor organization also spotlighted youth unemployment, noting that there were 73.8 million young people unemployed worldwide. It estimated that an additional half million would join the ranks of the jobless this year. The youth unemployment rate, now 12.6 percent, will probably rise to 12.9 percent by 2017, the agency said.

“The crisis has dramatically diminished the labor market prospects for young people,” the agency said, “as many experience long-term unemployment right from the start of their labor market entry, a situation that was never observed during earlier cyclical downturns.”

The agency said employment tapered off in 2011 before turning negative in 2012, with four million people added to global unemployment rolls last year.

But even countries in which jobless rates have not risen “often have experienced a worsening in job quality,” the organization said.

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