From as early as June 2020, the World Bank forecast the shrinkage of the world economy by 5.2% in 2020; the deepest recession since World War II. Are we facing a global unemployment pandemic?
During the coronavirus pandemic, the lockdowns imposed to contain the spread of the virus have significantly influenced the demand and supply of products. The result is a severe disruption of trade and finance and resulted in high unemployment figures. Economic activity has shrunk everywhere, and the hardest-hit countries are the ones where the pandemic hit severely.
The magnitude of the disruptions does vary from one region to the next, but countries that rely on tourism, commodity exports, global trade, and external financing have been the hardest hit.
The restrictions put in place to combat the pandemic have led to rocketing unemployment rates, with some countries relying on furloughing workers. According to the World Economic Forum, the disruptions to employment levels are not only caused by the pandemic, but also by the changing labor markets.
Other factors contributing to the changes in the labor market include rising automation and the transition to greener economies. In the World Economics’ Forum Regional Risks for Doing Business survey of 13,000 business leaders from 127 countries, 30 risks were surveyed. Business leaders feel unemployment is the biggest threat they currently face.
Unemployment rates in hard-hit countries
In a recent BBC report, the unemployment rate in the UK was reported to be 1.72 million people for the period September to November 2020. The 0.06% increase from the previous three months brought the unemployment rate to 5%.
Unemployment in the UK would be much higher without its furlough scheme, which it plans to maintain for at least the first few months of 2021.
Currently, Spain, another country hit hard by the pandemic, has one of the highest unemployment rates in the developed world. Its unemployment crisis started before the pandemic, and its central bank only expects it to start declining after 2022.
Since the middle of March 2020, the effects of the pandemic on unemployment have hit the U.S. hard. It was reported that 30 million claims were filed for unemployment benefits at the beginning. These figures have improved since.
Unfortunately, one of the gravest concerns is for the estimated 2 billion workers across the globe who work in the informal sectors. Unemployment in this sector poses severe challenges for governments because they are usually in the poorer regions of the continent that offer no social protection.