Joblessness may have peaked in May: OECD

The Organization for Economic Co-operation and Development (OECD) said unemployment may have peaked in the OECD area in May 2010 (having reached 8.6%), but that nations in the region will have to create about 17 million news jobs to return employment levels back to where they were before the financial crisis.

While the economic recovery is broadening and strengthening, employment growth is still lagging, OECD warned.

In the two years to the first quarter of 2010, employment fell by 2.1% in the OECD area and the unemployment rate increased by just over 50%, to 8.5%, corresponding to 17 million additional unemployed persons.

The OECD comprises 31 of the world’s most well-developed economies.

“Creating jobs has to be a top priority for governments,” said OECD Secretary-General Angel Gurría. “Cutting unemployment and fiscal deficits at the same time is a daunting challenge but it needs to be tackled head on. Despite signs of recovery in most countries, the risk remains that millions of people may lose touch with the labor market. High joblessness as the new normal cannot be accepted and has to be tackled by a comprehensive policy strategy.”

Of those 17 million jobs that have lost during the downturn, about 10 million were shed in the US.

Spain, which suffers from the highest rate of unemployment in the OECD area at 19.9%, has lost an estimated 2.5 million jobs since the end of 2007.

As a whole, together, about 47 million people are officially unemployed in the OECD area – although, if one includes whose
who are working part-time and want to work full-time, and those who have given up looking for jobs, the total figure of unemployed and/or under-employed may be as high as 80 million.

“A strong case can be made to ensure that labor market policies remain adequately funded,” the OECD noted. “But it becomes essential to focus on cost-effective programs and to target the most disadvantaged groups at risk of losing contact with the labor market.”

Tax breaks and other types of hiring subsidies for firms that recruit people who have been out of work for more than a year would help jump-start job creation, according to the report.

OECD cautions that the global economic recovery is “unlikely to be sufficiently vigorous to rapidly reabsorb current high levels of unemployment and under-employment.”

As such, the group’s projections indicate that the OECD unemployment rate may still be above 8% by the end of 2011.