Rich world unemployment back to pre-crash levels at last

Unemployment has fallen back to its pre-financial crisis levels at long last, almost a decade on from the credit crunch - AFP

Unemployment across the world’s developed economies is finally back down to levels last seen before the financial crisis, almost a decade on from the credit crunch.

Joblessness fell to 5.6pc in October across the 35 countries of the OECD, on par with its April 2008 level and down from a peak of 8.5pc in 2010.

Britain is one top performer with unemployment at a 42-year low. Joblessness rose from 5.1pc in 2008 to a peak of 8.4pc in 2011, before falling to 4.2pc now.

The US has done similarly well with unemployment now down to 4.1pc.

Even Portugal, which suffered an unemployment rate of 17.5pc at its peak in January 2013, is now back to its 2008 level of 8.5pc.

However, the population across the OECD is larger so in absolute terms the total number of unemployed people across the 35 countries remains 2.5m above its 2008 level, at 35.1m.

The progress is also uneven.

Greek unemployment has dropped from a peak of 27.9pc in 2013 to 20.6pc now - still well above its rate of 7.9pc in April 2008.

Spain’s rate of 16.7pc and Turkey’s 10.9pc are both above their 2008 levels.

The eurozone overall still suffers a jobless rate of 8.8pc, below its 12.1pc peak in 2013 but above its 2008 level of 7.4pc.

There is wide variation by age groups as well.

Youth unemployment of 11.8pc across the OECD as a whole is below the 11.9pc level in April 2008.

But countries such as Italy are poor performers, with a rate up from 19.9pc in the first quarter of 2008 to 35.4pc in the early months of 2017.

Britain is a prime example of a country where unemployment is already firmly below its pre-crash levels, having fallen to lows not seen since the 1970s Credit: JANE MINGAY

In those countries where the jobless rate is very low economists hope that pay growth will start to take off in the near future.

“With unemployment in the Anglo Saxon world now at rates which were once considered full employment, one of the great curiosities is why low unemployment has not resulted in faster wage growth,” said economist Peter Dixon at Commerzbank.

“It certainly appears that there have been structural shifts in the labour market across the industrialised world with the result that wages are less responsive for any given rate of unemployment.”

Meanwhile the hope is that the eurozone’s newfound economic resurgence will help it cut those high levels of unemployment, and economist Felix Huefner at UBS believes it has plenty of room to grow further.

“A rising labour supply through higher participation, combined with the still large pool of unemployed, points to slack still available, helping to explain moderate price pressures,” he said.

“On a longer-term perspective, higher labour force participation is beneficial for potential growth (but is also a necessity in ageing societies).”