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Sectoral impact of the crisis

Economic sectors at a glance: Economic recovery yet to be translated into jobs (Q&A)

The path for labour markets to return to pre-crisis levels remains long and signs of recovery in the economy are yet to be translated into jobs, says a new study by the ILO. The paper also shows how job losses are unequally distributed across regions and economic sectors, and between developed and developing countries. ILO Online spoke with Elizabeth Tinoco, Director of the ILO Sectoral Activities Department.

Article | 19 March 2010

ILO Online: What are the main trends with respect to the employment impact of the global economic crisis?

Elizabeth Tinoco: According to the ILO World of Work Report 2009, at least 20 million jobs have been lost since October 2008 when the financial crisis started. Five sectors (manufacturing, construction, wholesale and retail trade, transportation, and mining) account, on aggregate, for almost 16 million of the jobs lost. Manufacturing is the hardest hit economic sector. Job losses reached 9.4 million in this sector alone. Job cuts were widespread across manufacturing industries, including the automobile sector; the metal industry, and computer and electronic products. Because of the severity of lay-offs, it is unlikely that the recovery will happen soon in the manufacturing industry.

ILO Online: Can we expect a jobless recovery?

Elizabeth Tinoco: Signs of recovery in the economy are yet to be translated into jobs. While real GDP started to recover in the third quarter of 2009 in a number of developing and some advanced economies, on a year to year basis employment continued to decline in manufacturing (8.1 percent), transportation (1.9 percent) and the wholesale and retail trade (2 percent), albeit at a slower pace. Conditions in the construction sector generally remained poor over the same period. The number of jobs lost in this sector rose to 3.3 million in the third quarter of 2009 if we compare on a year to year basis.

ILO Online: What about other sectors like education and public services?

Elizabeth Tinoco: Signs of employment deterioration are also emerging in education and public administration. While the effects of the crisis were not immediate in these sectors, the repercussions of unprecedented fiscal deficits and government debt levels may threaten labour market conditions in 2010 and beyond in public services. Only a few sectors (financial intermediation and business services) have shown signs of a mild jobs recovery in the third quarter of 2009, while employment continued to grow steadily in the health sector. In total 1.6 million jobs were added in this sector in the third quarter of 2009 compared to 2008.

ILO Online: The report to the ILO Governing Body reveals important regional differences in employment trends?

Elizabeth Tinoco: Job losses are unequally distributed across regions and between developed and developing economies. Overall, employment in the Asian and Pacific region has shown greater resilience in most economic activities than Europe and the Americas. Similarly, developed countries have lost nearly twice as many jobs as developing/emerging economies. Export-oriented sectors and, to a lesser extent, agriculture were mostly affected in developing countries while manufacturing and the wholesale and retail trade lost more jobs in developed economies. Layoffs in construction were widespread across regions and between developed and developing economies.

ILO Online: Did you find any differences concerning the employment impact of the crisis on female and male workers?

Elizabeth Tinoco: Male workers appear to have suffered the most from the economic downturn across main economic activities. On average, in 2009 compared to 2008 men lost more jobs than women in manufacturing, construction, wholesale and retail and financial intermediation. Conversely, female workers consistently added jobs in health and public administration over the same period. In service sectors such as hotels and restaurants and wholesale and retail trade female and part-time workers were the first to lose their jobs, but also were among the first to get them back as the economic activity recovered.

ILO Online: Does the economic recovery have any impact on lay-offs and hiring?

Elizabeth Tinoco: The slowdown in employment decline in the third quarter of 2009 seems to reflect a diminished pace of lay-offs as opposed to firms effectively hiring. The available data across sectors suggest that employers expect to meet any short-term increase in demand by raising their existing employees’ hours of work and boosting productivity, thus delaying the need to hire new employees. In fact, after falling consistently in the last quarter of 2008 and the first two quarters of 2009, aggregate hours of work across sectors started to increase in the third quarter of 2009.

ILO Online: When will labour markets return to pre-crisis levels?

Elizabeth Tinoco: The path for labour markets to return to pre-crisis levels remains long. While significant macroeconomic policy measures helped to stabilize financial markets and temporarily improved consumer spending and industrial production, the fundamentals of the economy are still fragile. Industrial capacity utilization is very low, trade continues below pre-crisis levels, and lending to small businesses and households remains tight. The forthcoming expiration of several fiscal incentives and an early withdrawal of other stimulus measures may jeopardize some of the early gains of the stimulus unless private sector consumption and investment responds promptly to the pickup in activity.