Rising global unemployment and economic slowdowns have forced the International Labour Organization to review its previous forecasts for 2012 and 2013 and raise the projected levels of world unemployment.
Based on current unemployment trends the ILO state in their report Global Employment Outlook, April 2012, that they foresee an increase of a 0.1 percentage point each year in global unemployment, increasing the global unemployment rates to 6.1 per cent this year and 6.2 per cent in the next.
Global unemployment is expected to hit 202 million in 2012, up 2 million from the previous forecast and is expected to remain at over 6 per cent until 2016.
The ILO state that rising unemployment is more pronounced in advanced economies where the unemployment rate is projected to surge from 8.5 per cent in 2011 to 9.1 per cent in 2012, and 9.4 per cent in 2013.
The reason for ILO’s spring 2012 downgrade of the employment outlook is the International Monetary Fund’s April 2012 report, ‘World Economic Outlook - Growth Resuming, Dangers Remain’ which documents a significant slowdown in economic growth in advanced economies in the third quarter of 2011 thus resulting in a worsening global economic outlook. The report
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shows that the GDP growth forecast for 2012 has been revised down from 4 per cent to 3.5 per cent, and for 2013 from 4.5 per cent to 4.1 per cent. Its executive summary begins with:
"After suffering a major setback during 2011, global prospects are gradually strengthening again, but downside risks remain elevated."
The ILO lists 5 main contributing factors to this slowdown:
1. Households have reduced spending due to loss of income
2. Firms are also not making investments despite low interest reduced rates,
3. Banks and other lending institutions are hanging on to piles of dormant assets
4. Rising public debt and budgetary deficits in euro areas have increased borrowing costs resulting in austerity measures.
5. Weak domestic demand and the lack of exchange rate flexibility in the Eurozone prevents growth through exports