GENEVA — Unemployment in rich countries is projected to increase by 8 million over the next two years to reach 42 million as global downturn deepens, a new report said Tuesday.
This story first appeared in the November 26, 2008 issue of WWD. Subscribe Today.
The study by the Organisation for Economic Co-operation and Development said the rising numbers of jobless would further curtail consumer demand, adding to the growing problems of retailers, importers and domestic producers.
Real U.S. output is projected to contract 0.9 percent in 2009, compared with this year’s gain of 1.4 percent, before rebounding in 2010 to expand by 1.6 percent, said Klaus Schmidt-Hebbel, chief economist at the Paris-based OECD.
The agency forecasts the unemployment rate in the U.S. next year to rise to 7.3 percent from 5.7 this year, and climb to 7.5 percent in 2010.
The report forecast output next year in the 30 rich OECD nations will contract by 0.4 percent with the 15 European nation members posting a contraction of 0.6 percent and unemployment reaching 8.6 percent.
In the agency’s latest “Economic Outlook,” Schmidt-Hebbel said he expects U.S. output to fall during the first half of next year, then gradually pick up “as the effects of the credit squeeze abate, the housing downturn bottoms and monetary policy takes hold.”
The report anticipates U.S. private consumption next year to contract 1.2 percent versus this year’s tepid 0.4 percent gain, and the expansion of U.S. exports of goods and services to slow to 2.8 percent in 2009, down from this year’s 8.5 percent increase.
Similarly, it foresees U.S. imports of goods and services to again decline in 2009 at 2.1 percent.
The OECD said the downturn will also affect major emerging economies, such as China, Russia, Brazil and India, but adds the slowdown in growth will be from high levels. Marked by a weakening in export growth, China is forecast to grow 8 percent in 2009, down from 9.5 percent for this year, and inflation to be halved to 2.5 percent from the 2008 rate of 5 percent.
Affected by the fall in commodity prices, Russia is forecast to grow next year by 2.3 percent, down from 6.5 percent expansion this year, and Brazil by 3 percent, also down from 5.3 in 2008. India, which has continued to slacken, is forecast to grow 7.3 percent in 2009.
Meanwhile, the International Labor Organization said in a report also released Tuesday that wage growth in rich industrialized countries is to fall from 0.8 percent growth in 2008 to a decline of 0.5 percent next year. For the rest of the world, wages are predicted to grow by 1.1 percent, compared with 1.7 percent in 2008.
“This will have a severe impact on the purchasing power of wage earners,” said Manuela Tomei, head of working conditions at the ILO.
The ILO’s global wage report also expects industrial tensions to escalate. “Slow or negative growth combined with highly volatile prices will erode the real wages of many workers,” said ILO chief Juan Somavia.
The report warns “tensions are likely to intensify over wages, and the workplace may become vulnerable to wage-related disputes.”