An unprecedented rise in the inactive population since February has seen more than 30 million workers going missing from official unemployment statistics across selected OECD and Emerging Market economies. Because of this” hidden unemployment,” the true monthly hit to household consumption could be underestimated by USD14bn.
Only the tip of the iceberg: Up until now labor markets across many countries have proven much more resilient than economic activity - at least on the surface that is. Based on the long-run relation between GDP growth and changes in the unemployment rate , the true Covid-19-related labor market impact in some countries should be much more dire than what headline indicators suggest. In fact, joblessness rates should be 3-5pp higher in France, Italy, Spain and the UK and 10pp in South Africa. The U.S. stands out in our sample as the only country for which the unemployment rate is higher than historial relations with GDP growth would suggest.
Figure 1 – Latest official unemployment rate (%) vs. Q3 unemployment rate estimates based on Okun’s Law (%)
Only the tip of the iceberg: Up until now labor markets across many countries have proven much more resilient than economic activity - at least on the surface that is. Based on the long-run relation between GDP growth and changes in the unemployment rate , the true Covid-19-related labor market impact in some countries should be much more dire than what headline indicators suggest. In fact, joblessness rates should be 3-5pp higher in France, Italy, Spain and the UK and 10pp in South Africa. The U.S. stands out in our sample as the only country for which the unemployment rate is higher than historial relations with GDP growth would suggest.
Figure 1 – Latest official unemployment rate (%) vs. Q3 unemployment rate estimates based on Okun’s Law (%)