The Organization for Economic Co-operation and Development (OECD) is raising the red flag regarding the threat of labour shortage, which is threatening the global recovery especially within the 38-member country grouping.
While the unemployment rate in OECD countries overall fell for the fifth consecutive month to 5.8 per cent in September, the organisation has warned that the unemployment rate may conceal additional slack in the labour market, due to the pandemic.
While labour force participation has rebounded rapidly in Europe, data shows that about four million workers have left the labour force in the United States and in the United Kingdom.
Population change and economic inactivity means almost a million fewer people are in the workforce. Reduced migration and an increase in early retirement in some countries has exacerbated the problem to the extent that labour supply shortages are now seen as a major threat to a global economic recovery.
The OECD’s 38 members include Austria, Australia, Belgium, Canada, Chile, Colombia, Costa Rica, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland and Portugal.
Growth now at pre-pandemic levels
Despite slower growth than in the previous quarter, the gross domestic product of the OECD area has attained its pre-pandemic level in the third quarter of this year. Between the fourth quarter of 2019 and the last period, OECD GDP increased by 0.5 per cent.
However, among the major seven (G7) countries, only the US economy exceeded its pre-pandemic size, by 1.4 per cent. Quarter-on-quarter growth in the OECD area also slowed to 0.9 per cent from 1.7 per cent in the second quarter.
These growth rates were the same for the major seven (G7) economies. In the third quarter, France recorded the strongest GDP growth of 3.0 per cent, compared with 1.3 per cent in the second quarter, followed by Italy (2.6 per cent), Germany (1.8 per cent) and the United Kingdom (1.3 per cent).
However, the resurgence of COVID-19 cases, combined with new restrictions in Europe is putting the strong recovery from the pandemic on the continent into doubt for the fourth quarter. Signs that the post-pandemic economic rebound may have reached its peak, particularly in the US, the UK, Germany and Japan, are already expressed by OECD composite leading indicators.
These indicators contain data from order books, building permits, confidence indicators, long-term interest rates, new car registrations and others to anticipate fluctuations in economic activity over the next six to nine months. Among major emerging-market economies, the data suggests growth may lose momentum in China and India.
China is currently considering new stimulus measures in the face of a stuttering economy and rising prices. The indicators point to moderate economic expansion in Canada and the Euro area.