Low labour force participation, rising geopolitical tensions, high interest rates in advanced economies may raise unemployment rate to 5.2%
The global unemployment rate is expected to rise slightly in 2024 and an additional two million workers will seek employment, according to the International Labour Organization (ILO). The ILO projected a decline in labour force participation rates and slowdown in employment growth, which may raise the global unemployment rate from 5.1 per cent in 2023 to 5.2 per cent in 2024.
Uneven labour force participation, rising geopolitical tensions, potential disruptions in global value chains and high interest rates in advanced economies may all play a role in adding to the job gap, said World Employment and Social Outlook Trends 2024 report. The report was released January 10, 2024.
In 2023, labour market participation rates had recovered significantly from pandemic lows, particularly in lower-middle-income and high-income countries. However, significant differences between labour market groups persisted, contributing to labour market imbalances, particularly in advanced economies, according to the report. Average working hours continued to remain below pre-pandemic levels in 2019, reducing overall available labour input.
The global job gap narrowed in 2023, but remained high at nearly 435 million, the ILO pointed out. The erosion of real wages and living standards caused by high and persistent inflation rates, as well as rising housing costs, is unlikely to be quickly compensated.
On January 9, 2024, the World Bank warned the global economy may witness a poor performance by the end of the year— the slowest half-decade of gross domestic product (GDP) growth in 30 years. Mounting geopolitical tensions could pose new near-term risks to the global economy and the world may experience the slowest half-decade of GDP growth in three decades, it said.
The ILO stated in the report:
During periods of slow productivity growth, real disposable income and real wages are often vulnerable to sudden price shocks. As only a few firms have seen their profits accelerate, most workers have been unable to ask for stronger increases in their earnings, and so they and their households are facing an accelerating erosion of their real disposable income.
The GDP in 2023 proved to be more resilient than was anticipated, said the ILO. Inflation pressures eased in 2023 but remained elevated.
The return of labour force participation rates to pre-pandemic levels has been uneven and not all labour market groups have benefited equally, the report added. The labour market outlook is expected to deteriorate in the near future, though only moderately, the report said.
The introduction and popularity of artificial intelligence may exacerbate the problem, as the ILO stated labour market adjustment will be tested further by accelerating technological progress.
Rising geopolitical tensions were among the factors that could exacerbate employment challenges. The ILO highlighted the economic, employment and social risks and related spillovers arising from the Israel–Hamas conflict, like the scale of refugee crisis and the impact on neighbouring West Asian countries and Europe.
Potential disruptions in global value chains are another major risk, the report said. The global economy remains highly interconnected and is far from immune to regional developments. The ILO also brought out the role of high interest rates in developed economies like the United States, which could have ripple effects on global growth.
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