Jobs a key concern for 2011

If any topic dominated the latest World Economic Forum at Davos, Switzerland, it was jobs or, more accurately, how to create more new jobs.

It has been top of the economic agenda, in fact, ever since the global economy started to recover from the financial crisis in 2009.

Some economists have described the recent performance of the world's economy as "a jobless recovery" and it is something that is worrying politicians across the globe.

Many countries have reported strong growth in their economies over the past 18 months as huge stimulus packages have prompted a business rebound.

But, despite the best efforts of governments, this has not been reflected in the number of jobs created, and in many regions unemployment remains a critical problem.

Figures from the International Labour Organisation (ILO) at the end of January showed that worldwide unemployment stayed little changed during 2010.

The ILO also forecast that the jobless number will fall by less than 1% during 2011.

According to the UN-run body, global unemployment stood at 205m in 2010, essentially unchanged from 2009, and 27.6m more than on the eve of the global economic crisis in 2007.

The ILO also projected a global unemployment rate of 6.1% in 2011, equivalent to 203.3m out of work, a tiny reduction on last year.

For developed economies, such as the UK, Europe and US, the latest ILO data highlighted some major areas of concern.

Over half, 55%, of the increase in global unemployment between 2007 and 2010 occurred in the Developed Economies and European Union (EU), a region that only accounts for 15% of the world’s labour force.

This contrasts with younger, faster growing economies such as Brazil, Thailand and Uruguay, which saw the level of unemployment fall below levels prior to the financial crisis of 2008.

An estimated 1.53bn workers are also classed as vulnerable, corresponding to a rate of 50.1%, and broadly unchanged since 2008 in sharp contrast to the steady and significant average decline in the years preceding the crisis.

Politicians are already feeling the heat from the stubbornly high level of unemployment.

US President Barack Obama faced heavy criticism both before and after his recent State of the Union address for failing to lift the numbers employed in the US, despite spending hundreds of billion dollars on stimulus measures.

The Federal Reserve, the US central bank, has already indicated it believes it will take years for the job market to recover from the recession.

Latest US monthly jobs data showed the economy added 104,000 jobs in December, with the unemployment rate running at 9.4%.

Economists expect that unemployment rate to rise slightly in January, even though the number of jobs created will also increase.

If the predictions are accurate and the jobless rate does go up, it would have exceeded 9% for 21 consecutive months, the longest stretch since records began in 1948.

To try to boost employment, the Fed is to pump a further $600bn into the economy through a bond buying programme, but the key is for the large US corporations to start to recruit again now that profits and balance sheets have been largely repaired.

“The economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions,” the Fed said. “The unemployment rate is elevated.”

Ford Motor has already stated it will increase hiring. The car maker said it may hire more than 7,000 workers in the next two years, but a lot more is needed.

“Companies will increase hiring as they can’t keep pushing their existing workforce any further,” said Nigel Gault, chief US economist at IHS Global Insight.

The US lost about 8.4m jobs during December 2007 and ended in June 2009, when it was classed as being in recession. Last year, the US added 1.1m new jobs even though the economy grew at 3.2% in the last quarter of 2010.

Europe faces similar problems. Renowned economist Nouriel Roubini warned that the UK in particular has a “whiff of stagflation”, highlighting recent data showing the economy falling back while inflation is rising – pointing to a possible double-dip recession.

Youth unemployment globally is another issue, but especially acute in the UK, he added. The rate of unemployment among the under 25s in Britain is now approaching 20%.

Worldwide, 78m young people were unemployed in 2010, well above the pre-crisis level of 73.5m in 2007, with the rate among youths aged 15-24 at 12.6%, 2.6 times the adult rate of unemployment.

UK Chancellor of the Exchequer George Osborne this week urged UK businesses to stop hoarding cash and use it to create jobs.

“My frustration is that British companies are sitting on cash equivalent to 5% of GDP. I have to persuade them to invest that cash,” he said in a speech at Davos.

Barclays chief executive Bob Diamond echoed his call.

“Jobs are the biggest issue. We are not going to see added stimulus from the public sector. There is $3trn to $4trn in cash sitting in American and UK companies. If we can get the confidence back so they will invest in jobs and growth, we can be optimistic.”

Others though are not so sure. Philip Jennings, of the UNI global trade union group, warned the gap between eastern and western jobs markets was a threat and urged G20 nations to focus on creating employment at a CNBC-hosted event at the forum.

Indian steel magnate Naveen Jindal added that the US and Europe must retrain its workforce rapidly to take on high-tech jobs if it is to deal with cut levels of unemployment.

Jindal, who heads Jindal Steel and Power, India’s most valuable steel producer, believes that the West had to accept the loss of unskilled jobs to China and India.

Western industrial jobs outsourced to Asia will not return, he said, especially as labour mobility will encourage movement of skilled workers to more vibrant eastern markets.

Jennings urged western governments to spend more on infrastructure to revive the economy, “Stop the rush to the exits for austerity programmes — they will only do more harm for jobs,” he said.

According to CNBC, about 2.5m posts remain unfilled because appropriate candidates to do technical jobs do not exist in sufficient numbers.