Stronger U.S. Job Market Seen, Global Unemployment Outlook Grim

By ROBERT SCALLY —  The outlook for the U.S. economy is mostly unchanged from that of three months ago, according to 45 economic forecasters surveyed by the Federal Reserve Bank of Philadelphia. The economy continues to slowly improve, and should keep getting better for the next few years.

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Slow growth ahead.

The overall forecast for job growth and unemployment worldwide, however, is less optimistic

A panel of 45 professional economic forecasters surveyed by the Federal Reserve Bank of Philadelphia in early February 2012 expects a stronger labor market in 2012, but is predicting slightly weaker job growth than previously forecast.

Annual average unemployment is projected to be 8.3% in 2012, before falling to 7.9% in 2013, 7.4% in 2014, and 6.7% in 2015. The estimates for 2012 to 2014 are 0.5 percentage points lower than the last survey.

However, the group of forecasters revised upward their growth estimates for jobs in three of the next four quarters.

Forecasters surveyed by the Philadelphia Fed project 2.2% annual rate Gross Domestic Product growth this quarter, down from 2.4%, in the prior estimate. Forecasters see real GDP growing 2.3% in 2012 on an annual-average over annual-average basis, down from the previous estimate of 2.4%.

The nation’s real GDP will grow 2.7% in 2013, 3.0% in 2014, and 3.1% in 2015, according to the Federal Reserve Report.

Unemployment is projected to average of 8.3% in 2012, dropping to 7.9% in 2013, 7.4% in 2014, and 6.7% in 2015. The estimates for 2012 to 2014 are 0.5 percentage points lower than the last survey.

Various credible forecasts of worldwide unemployment and job growth during the next few years aren’t happy reading.

Until at least the middle of the next decade, annual global growth will slow to 3%–a rate below that of the last two decades, according to independent economic analysis organization The Conference Board’s Global Economic Outlook 2012.

Economic recovery in advanced economies will be more than offset by the gradual slowdown in emerging economies as they mature.

The net result will be slow global growth.

The greatest challenge for the global economy in this slow growth environment will be increasing productivity without losing jobs for the millions of workers seeking reasonably paid jobs to support decent living standards.

The growth rate of per capita income globally has been around 2.5% since the beginning of the century but sometime between 2017 and 2025, this rate will fall below 2%. Unlike past 50 years, that slowdown will be accompanied by slower population growth.

A French unemployment queue. Photo: ILO/M

A French unemployment queue. Photo: ILO/M. Crozet

The world faces the “urgent challenge” of creating 600 million jobs in the next decade to generate sustainable growth, according to the International Labour Organization (ILO).

“After three years of continuous crisis conditions in global labor markets and against the prospect of a further deterioration of economic activity, there is a backlog of global unemployment of 200 million,” according to the ILO’s report Global Employment Trends 2012. More than 400 million new jobs will be needed during the next decade just to absorb the estimated 40 million new people entering labor force annually.

The report says the recovery that started in 2009 has been short-lived and that there are still 27 million more unemployed workers than at the start of the crisis.

There are almost 29 million fewer workers in the labor force now than would be expected based on pre-crisis trends, according to the ILO. This group is the so-called “discouraged workers” who have given up looking for a job.

If these discouraged workers were counted as unemployed, then global unemployment would jump from 197 million to 225 million, and the unemployment rate would rise from 6% to 6.9%, the ILO reports.

As 2012 gets underway, the United Nations finds the world’s economy “on the brink of another major downturn.”

Global economic growth slowed in mid-2011 and this current slowdown is expected to continue into 2013, according to a UN report on the world economy.

The United Nations’ baseline world gross product (WGP) 2012 growth rate forecast is 2.6%, and 3.2% for 2013, below pre-crisis global growth levels.

High U.S. unemployment and low wage growth are holding back global demand.

Euro zone growth has slowed considerably and the seemingly ever-simmering sovereign debt crisis has depressed consumer and business confidence throughout Europe.

Developing economies will continue to drive the world economy, growing 5.4% on average in 2012 and 5.8% in 2013 in the UN’s baseline outlook.

Chinese flag

Growth in China and India should remain robust, but will eventually start to slow.

China’s GDP growth slowed from 10.3% in 2010 to 9.3% in 2011, and will slow to below 9% in 2012-2013. India’s economy is expected to grow between 7.7% and 7.9% in 2012-2013, down from 8.5% in 2010.

Although the unemployed in these nations may disagree, low-income countries have had relatively mild side effects from the economic slowdown, according to the UN. Despite the global downturn, poorer countries may see average income growth at or slightly above 3.8% to 3.5% in 2012 and 2013, according to the UN.

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