31 Oct 2011

Global economy ‘on verge of jobs recession’

As leading organisations warn problems in the global economy could lead to international unrest, Gary Gibbon reports on the latest setback in the eurozone crisis – a Greek referendum on the bailout.

An International Labour Organisation (ILO) report warned that the stalled global recovery is affecting employment on the same day as the UK government appeared to take steps to combat similar fears in this country – pledging to spend almost £1bn to create 37,000 jobs.

The ILO report said that, on current trends, it would take at least five years for employment levels in advanced countries to return to pre-crisis levels.

It said 80m jobs need to be created over the next two years, but with growth slowing, only half this number looks likely. The report said the risk of social unrest was rising in 45 of 118 countries.

“We have reached the moment of truth. We have a brief window of opportunity to avoid a major double dip in employment,” said the ILO’s Raymond Torres.

We have reached the moment of truth. Raymond Torres, ILO

Greek referendum

One country where there is already social unrest is Greece, whose government has announced it will hold a referendum on the aid package it is receiving to resolve its debt crisis.

Greece has been hit by weeks of protests against the austerity measures it is pushing through as a condition of this aid, and opinion polls show that nearly 60 per cent of Greeks have a negative view of the deal their leaders have struck with the EU.

Channel 4 News Political Editor Gary Gibbon said the referendum had the potential to be a “grenade” thrown into the crisis ahead of this week’s G20 summit in Cannes.

He said: “This has the whiff of a throw of the dice. Could work – might not.

“This a grenade in the eurozone crisis on the eve of a G20 when Europe was hoping to present a reformed and self-disciplined face to the world.” You can read more from Gary Gibbon on the Greek referendum grenade in his blog here.

 The International Labour Organization says the global economy is on the verge of a deep jobs recession that could lead to social unrest across the world.

‘Hoarded staff’

As protesters continue to occupy land outside St Paul’s Cathedral in London, could the social unrest sparked by job losses spread to the UK?

John Philpott, chief economist at the Chartered Institute of Personnel and Development, told Channel 4 News that Britain did face potential unemployment problems.

He said there was a danger that British companies that “hoarded” staff during the recession could now make them redundant.

He said:”One of the worrying things in the ILO report is that employers who hoarded people in the recession are now starting to let those workers go.”

This could be a problem in Britain, where there was “hoarding behaviour” when the country was in recession.

“Employers were relatively optimistic during the recession that the economy would recover quite quickly and held on to their workers. The longer we get no sign of a strong recovery, there’s a greater risk that employers will make more of these people redundant.”

Employers who hoarded people in the recession are now starting to let those workers go. Professor John Philpott

Growth downgraded

The grim warning on jobs comes as the Organisation for Economic Co-operation and Development (OECD) think tank lowers its growth forecasts.

In May, it predicted output would rise by 2 per cent this year and in 2012 in the euro area. It now expects growth of 1.6 per cent in 2011 and just 0.3 per cent in 2012. It had expected growth in the US of 2.6 per cent and 3.1 per cent.These forecasts have now been cut to 1.7per cent and 1.8 per cent.

Official figures published on Tuesday are expected to show that the British economy is growing slightly. Economists expect growth of 0.3 per cent from July to September, up from 0.1 per cent in the previous three months.

Eurozone bailout
So how is the EU grand bailout plan looking today, 5 days on? China's President Hu is on a European tour, inspecting some of his investments. He's in Austria today and (at best) mixed signals continue on whether China will want to help bail out the eurozone. Read more from Political Editor Gary Gibbon

G20 summit

The OECD said bold action was needed at this week’s G20 summit in Cannes. Secretary general Angel Gurria called on politicians to implement the eurozone rescue package agreed last week “promptly and forcefully”.

EU leaders agreed a 50 per cent “haircut” on Greek debt, bank recapitalisation and an increase in the size of the eurozone bailout fund to 1tr euros (£880 billion).

The government’s action to tackle the deficit has put the UK ahead of the curve. Treasury spokesman

The OECD said the prospects for growth in the eurozone could be worse if the rescue deal failed to win the confidence of the markets.

Professor Philpott said if the euro crisis was not resolved, unemployment in Britain could rise above 3 million, but he added that he did not believe the UK would experience a double-dip recession.

A Treasury spokesman said: “Good progress has been made recently by the eurozone to address the conditions it faces and, as the OECD states, it is important that this momentum is maintained.

“In this time of international uncertainty, the government’s action to tackle the deficit has put the UK ahead of the curve and is helping to mitigate against the risks that are weighing down on confidence elsewhere.”