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Labour Markets in Recession: An International Comparison

Published online by Cambridge University Press:  26 March 2020

Dawn Holland ,
Simon Kirby  and
Rachel Whitworth
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Extract

The global recession has driven a surge in the number of unemployed people across the world. The ILO estimates that global unemployment in 2009 will be some 29–59 million higher in 2009 than it was in 2007, a rise of 16–33 per cent. After taking into account global population projections, this points to a rise in the global unemployment rate of 0.8–1.7 percentage points. A rule of thumb that is often used to relate unemployment to output suggests that a decline in GDP of 2–3 per cent is associated with a 1 percentage point increase in the unemployment rate (see for example Knotek, 2007). Known as Okun's rule of thumb, these estimates are based on a simple regression of the percentage change in output against the percentage point shift in the unemployment rate. These estimates vary across time and across countries, and obviously omit important factors that determine potential output. Nonetheless, the framework provides a convenient way of comparing current labour market developments with behaviour in the recent past. In figure 1 we illustrate the relationship between GDP growth and the change in the unemployment rate in the OECD as a whole, using quarterly data from 1988Q2 to 2008Q3.

Type
Articles
Information
National Institute Economic Review , Volume 209 , July 2009 , pp. 35 - 41
Copyright
Copyright © 2009 National Institute of Economic and Social Research

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