GENEVA — Rising global unemployment levels and shrinking economies are expected to persist through 2009, according to reports from the United Nations and the International Labor Organization.

This story first appeared in the June 2, 2009 issue of WWD. Subscribe Today.

The global economy is projected to shrink 2.6 percent this year, down sharply from the 0.5 percent forecast in January, and world trade volume is expected to decline 11 percent, said the U.N.’s “World Economic Situation and Prospects Mid-2009 Update.” A separate study by the ILO projected the number of unemployed people worldwide would increase 31 million to 50.4 million this year, reaching 220 million to 239 million.

While the U.N. forecasts declines this year, a mild recovery is expected to take hold next year, led by improving conditions in Asia.

“We see recovery of the global economy based on fiscal [stimulus packages] and a bottoming out of financial problems in the second half of 2009,” said Rob Vos, director of development policy and analysis at the U.N. Department of Economic and Social Affairs.

The basic recovery should start in the first months of 2010, led by public sector demand such as new investment in infrastructure, although consumer demand will likely lag, Vos said. He expects durable and luxury good items to remain subdued for awhile, but basic consumer goods such as food and apparel to see better growth.

In 2010, world output is expected to expand 1.6 percent and global trade volume to grow 4.1 percent, the report said. East Asia is expected to lead the recovery, growing 5.6 percent compared with this year’s 3 percent gain.

Among the major economies, Vos said China, based on its engaged domestic stimulus package, should grow 7 to 8 percent in 2010, up from this year’s expected level of 5.6 percent. In addition, India is forecast to grow 6.3 percent, up from this year’s projected 5 percent.

The report anticipates the U.S. economy will contract 3.5 percent this year and expand 1 percent in 2010, “well below what is needed for recovery from the downturn.” The Eurozone economy is forecast to shrink 3.7 percent and contract 0.1 percent in 2010.

But the study cautioned there are downside risks to its outlook.

“A more prolonged global recession is possible if the vicious circle between financial destabilization and retrenchment in the real economy cannot be sufficiently contained and farther-reaching, concerted global policy actions are not taken,” the report said.

It also highlights that trade flows, which declined sharply at the end of last year, continued dropping in the first quarter.

“The impact of falling global demand is compounded by a drying up of trade finance and a rise in protectionist trends,” the report concluded, noting that the sharpest declines in trade have been among Asian economies.

The ILO’s employment study found that in 2008, global unemployment hit almost 189 million, up from 180.2 million in 2007. The economies of Western nations, including the U.S., will lose more than 12 million jobs this year, accounting for 35 to 40 percent of the global increase, the report estimated.

“We are seeing an unprecedented increase in unemployment,” said Juan Somavia, ILO director general, citing “grave concern.”

Lawrence Jeff Johnson, lead ILO economist, said manufacturing, finance and real estate have been severely affected by economic weakness, and noted that the Asian export-oriented manufacturing had been hit hard.

Although Somavia said growth could rebound next year, the ILO forecast that unemployment would continue to increase in 2010, adding that past experience suggests there is an average lag of four to five years before unemployment returns to precrisis levels.

To try and limit the damage — and ahead of the annual ILO ministerial meeting that begins here on Wednesday — Somavia is ramping up international support for a global jobs pact “aimed at placing employment creation and social protection at the center of recovery policies.”

A global accord, he said, “would stimulate the real economy and sustain working families through employment-oriented measures. It would reduce the time to recovery.”


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