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Data released on Thursday showed that employment in developed economies hit a record high in the second quarter despite high inflation and growing pressure from rising interest rates.
The share of the working-age population in the 38 OECD member countries has risen above 70% for the first time since 2005, the Paris-based OECD said. This reflects record highs in more than two-thirds of countries and across the EU and Eurozone.
The labor force participation rate for both men and women has also risen to its highest level since 2008, with 73.7% of the working-age population working or looking for work. Even Italy, which has the lowest female employment ratio in the EU, achieved by far the best performance on both indicators, as did France, Germany and Japan.
Although the economic backdrop has weakened, economists have given various explanations for the continued strength of the job market: labor shortages caused by an aging population and changing lifestyles; a wave of public sector hiring triggered by the epidemic; concerted efforts by countries such as France to Subsidized training programs address the long-standing problem of youth unemployment.
Unemployment rates have begun to rise in some countries, including the United States and the United Kingdom, since the middle of this year. The youth unemployment rate – often an early indicator of a broader downturn in the labor market – also rose slightly. But the OECD said overall interest rates in the OECD, EU and euro zone remained at historically low levels in August.
Melanie Debono of Pantheon Macroeconomic Consulting said in a report released last week that “resilience remains the theme of the labor market game in the face of slowing labor market activity.” .
The strength of the job market has raised hopes that central banks will be able to tame high inflation without the painful waves of job losses that have accompanied past periods of rapid monetary tightening.
But it also allows workers to demand higher wage growth – especially in countries such as the UK, where labor force participation remains well below its previous peak. Central banks worry this could exacerbate high inflation and force them to keep interest rates high for longer.
Although layoffs are now becoming more common and wage growth has slowed, “the overall impression is of a return to normality after an over-the-top post-pandemic recovery rather than a material slowdown,” said Tamara Basic Vasiljev. Oxford Economics Consulting. “This may require longer-term interest rate increases.”
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