Will the West’s bewildering employment miracle continue?

Iif you want To see what the world of swimming at work looks like, visit JapanAt airports, they are employed to straighten suitcases after they roll onto the baggage carousel. A uniformed man with a fluorescent baton stands outside the construction site, politely reminding me that it’s probably not a good idea to set foot on the site. At the department store, a smartly dressed woman will help you to use the elevator. And at his one of Tokyo’s best bars, a team of four was involved in preparing your correspondent’s gin martini (from the freezer, of course, free-flowing and very dry). ).

now the rest rich world I am becoming more and more Japanese. Since the headache days after lockdown 2021 gdp growth in 38 countries OECD has slowed to a near plateau and is negative in some countries. Business confidence is below its long-term average. Still, I don’t see many signs of weakness. labor marketOn March 2, Federal Reserve Governor Christopher Waller said the US labor market was “excessively tight.”across OECD Overall, the unemployment rate in December, the most recent month for which official data is available, was 4.9%, the lowest in decades (see Figure 1). HNWIs added about 1 million jobs in the third and fourth quarters of this year, in line with their long-term half of OECD Countries such as Canada, France and Germany have ever higher proportions of their working-age population in work.

Unemployment is rising in some countries, such as Austria and Israel. One of his worst performing countries is Finland, where the unemployment rate has risen by more than a percentage point from its post-lockdown lows.. Faced with high energy prices and reduced trade with Russia, gdp In Q4 2022, it decreased by 0.6%. But “worst” is relative. At his 7.2% in December, Finland’s unemployment rate is still well below its long-term average. On the other hand, most of the places that had very high unemployment rates in the early 2010s (Greece, Italy, Spain) are now much better.

This employment miracle suggests that there are serious changes taking place in the economies of the West. To understand why, go back to Japan. Local employers hate to lay off workers even if there is little they can do. With more and more people retiring, businesses are having trouble finding new staff, so they are reluctant to let people go unless they have no other choice. As a result, unemployment rarely rises even during recessions. Over the past three decades, Japan’s unemployment rate has changed by only 3.5 percentage points, compared with her 9.5 percentage points in the average rich country.

A more Japanese labor market has its disadvantages. If workers don’t leave underperforming firms, they won’t be able to join more innovative firms that drive growth. Indeed, the data suggest that productivity growth in rich countries is currently very weak. On the other hand, unemployment spells can have horrific human tolls, especially on young people, who may get lower salaries for the rest of their working lives. Recessions also tend to be milder, points out Dario Perkins. TS Lombard, a financial services company. If there are no cracks in the labor market, people will be able to continue spending even as growth slows.

What explains the apparent Japanese turn of employers? Perhaps after the hardships of the pandemic, bosses are simply being nicer to their employees than they were before. Another more realistic possibility is that the company is in good financial standing. This can help you withstand today’s lower revenue without having to cut costs right away (see Figure 2). Many businesses received support from the government during covid. And corporate profits have been at a high level in recent years. Businesses in the affluent world have about a third more cash than they had pre-pandemic.

A more interesting possibility concerns the workforce. By our estimates, the affluent world is “short” of 10 million workers, or about 1.5% of the total workforce, compared to pre-pandemic trends (see Figure 3). The workforce is actually shrinking in the UK and Italy. Early retirement and a growing elderly population explain some of the deficit. Covid-19 may have prompted people to reassess their priorities, prompting them to drop out. Some even speculate that the prolonged coronavirus is forcing people to sit on the sidelines of the economy. Whatever the explanation, the drop in attendance wreaked havoc on corporate planning. Many laid off staff when the pandemic hit, but struggled to rehire them in 2021. OECD A record 30m was recorded.

With another recession looming, employers may not want to make the same mistake.Recent Global Report by s&p Consultancy Global Market Intelligence notes that “companies are reluctant to authorize layoffs due to the significant challenges faced in post-pandemic rehiring.” In the US, so far, total job losses have not been as high as normal at the start of the year. Bank JPMorgan Chase’s Daniel Silver said this is because “companies are reluctant to let workers go because they perceive that eventual rehiring will be difficult.” I’m guessing.

Far from being avoided, labor market pain may simply be postponed. In some previous recessions, it took some time before the unemployment rate started to rise definitively. gdp started to fall. But “real time” data show little sign that unemployment is about to skyrocket. Employers in most countries still have ambitious hiring plans, according to a recent survey by his ManpowerGroup, a staffing agency. In the United States, a survey by lobby group the National Federation of Independent Businesses found an unusually large proportion of small businesses planning to create new jobs in the next three months.

Central banks facing a resilient labor market in the face of rising interest rates may seek to tighten monetary policy further. Further rises in fees, or another energy shock, could push some employers beyond their limits and force them to cut jobs. Yet the pressure to retain staff can be a structural problem. Over the next decade, the HNWI population will age rapidly, further dragging down the labor supply. Finding good workers will become increasingly difficult. Finding the perfect martini maker will be harder than it is now. Will the West’s bewildering employment miracle continue?

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