A Word From Those Who Still Think the Economy Is Doomed

The International Labour Organization warned in its “World of Work” report that “a stalled global economic recovery has begun to dramatically affect labour markets.” A major labor body has an incentive to make such a statement because its job is to promote  the creation of jobs. But, the ILO may be right nevertheless.

The most important point in the report is this: “On current trends, it will take at least five years to return employment in advanced economies to pre-crisis levels, one year later than projected in last year’s report.” A year is an eternity for a global economy that has already been in deep trouble for three years. The destruction of wealth, or a lack of wealth creation, would stretch into the hundreds of billions of dollars worldwide if the numbers of the jobless across the world stays high for an extended period.

The ILO’s incentives for issuing the report may not be entirely pure, but that could be beside the point. If its research is any good, “Out of 118 countries with available data, 69 countries show an increase in the percentage of people reporting a worsening of living standards in 2010 compared to 2006.”

There has been a growth in optimism about the prospects of the global economy over the past two months. The credit problems in the EU were solved last week. The US GDP rose 2.5% in the third quarter. China’s PMI was moderately weak for the past month, but not weak enough to cause an alarm about global demand for its finished goods. There is less alarm that moribund economies in the U.S., UK, EU and Japan will harm the GDP expansions of large developing nations like India or Brazil. All of this optimism has triggered surges in global stock markets. U.S. indices in October rose by the greatest amount in any month in the past nine years.

But economies do not run on trends. They run on job creation and business profits. The ILO says the jobs recovery worldwide is well short of that needed to show that the 2007 to 2009 recession is over. Labor has a bias to state its case for job creation. That does not mean the report’s conclusions are worthless.

Douglas A. McIntyre