Despite talk of economic "green shoots," more people around the world received pink slips last month.
The jobless rate climbed to 9.2 percent in the 16 Eurozone nations of the EU, the highest rate in a decade. In the U.S. unemployment has hit a 25-year high of 8.9 percent and Hong Kong unemployment hit a three-year high of 5.3 percent in April. Meeting in Geneva this week, the International Labor Organization predicts global unemployment could eclipse 7 percent for the first time since it began keeping data in 1991. The ILO predicts unemployment will rise into 2011 and potentially trigger social unrest, according to the report “Tackling the Global Jobs Crisis” released this week. Meanwhile, global equity markets have rebounded in the past five months. Since March, the S&P 500 Index has regained its losses for 2009. The MSCI Asia Pacific Index is up 49 percent since March 9, when it hit a five-year low. On June 1, the Hang Seng Index in Hong finished the day at 18,888 — “8” being an auspicious number in China, a mood matched by the fact the market rose 17 percent in the month of May. Markets appear buoyed by the decreasing speed of gloomy economic data in the tumult following the collapse of Lehman Brothers last September. With the exception of the General Motors bankruptcy protection announcement this week, the number of “mass layoffs” by companies seems to be tapering off. “We are seeing in every major sector across the board that job losses are beginning to wane,” Lakshman Achuthan, managing director of Economic Cycle Research Institute, recently told CNN. “The slash and burn that we were seeing a few months ago is starting to ease off and that is the first sign, a key first sign that the recession is drawing to a close.” Unemployment lags behind other statistics that signal a contracting or rebounding economy such as stock market returns. However, there is a chicken-and-egg question among analysts whether any recovery without job growth can truly be called a “recovery.”
Green shoots or hopeless optimism
EU protests over unemployment
“I, sadly, have full confidence in a very bleak scenario simply because of this expansion of unemployment,” said Kirby Daley, senior strategist for Newedge Group. The Organization for Economic Co-operation and Development predicts the U.S. jobless rate to eclipse 10 percent next year. The number of people on unemployment benefits in G7 nations will reach 36 million in 2010, nearly double the number in 2007, the OECD predicts. The growth of the global economy was primed by the spending might of U.S. consumers. And Americans have quickly turned down the spending spigot: personal savings rates in the U.S. increased to 5.7 percent in April — a 14-year high, according to the U.S. Department of Commerce. “You can’t credibly talk about green shoots in an economy that’s driven 70 percent by consumer spending,” Daley said. The market rebound “is more because of cheerleading by the Obama administration, banks and CEOs … there is nothing to sustain it,” he added. So far, the U.S. has lost 5.7 million jobs in the downturn. Many of those jobs won’t return. “We’re probably going to lose maybe a million more before this recession’s over, (and) to regain those jobs is going to take years,” Achuthan said. “That’s not going to happen overnight.”