OECD: Canada, U.S. to see unemployment fall, Europe will keep rate high

PARIS – Unemployment rates in Canada and the United States will fall significantly by the end of next year but the overall rate among some of the world’s advanced economies will remain high, the OECD forecasts in a report issued Tuesday.

For the 34-country Organization for Economic Co-operation and Devepment, overall unemployment is projected to fall slightly next year to 7.8 per cent from eight per cent.

In Canada, which weathered the latest recession better than many other advanced countries, the unemployment rate was 7.1 per cent in the first quarter of this year and is projected to fall to 6.7 per cent by the end of 2014.

The OECD says Canada continues to outpace many other member countries but it hasn’t completely recovered from the 2008-09 financial crisis, when the national unemploymjent rate was 6.1 per cent.

It also notes that the share of long-term unemployed, who have without a job for a year or more, has nearly doubled in Canada since the beginning of the recession.

“The number of short-term unemployed grew rapidly early in the recession, when many workers were laid-off, and then receded as workers either found jobs in the recovering labour market or fell into long-term unemployment,” the OECD says.

“By contrast, the number of long-term unemployed has yet to decline.”

It said a possible reason that the long-term unemployed have been so slow to benefit from the recovery is that employers often “prefer to hire new labour market entrants and the short-term unemployed.”

In addition to Canada, the United States will see unemployment fall significantly by the end of next year and Germany will improve on its already low unemployment rate, according to the Paris-based organization.

It projects the U.S. unemployment rate will fall to 6.7 per cent by the end of 2014, from 7.6 per cent at the end of June and from a post-recession peak near 10 per cent in the fall of 2009.

In Germany, Europe’s strongest economy, the unemployment rate was 5.3 per cent in May and is expected to decline further next year, the report says.

The OECD is forecasting that the jobless rate for the countries that use the euro will rise from 12.2 per cent to 12.3 per cent by the end of next year, but many countries, like Greece, Spain and Portugal, will see a much sharper increase.

The OECD says young people and low-skilled workers have borne the brunt of the crisis.

“The social scars of the crisis are far from being healed,” the organization’s secretary-general, Angel Gurria, said. “Many of our countries continue to struggle with high and persistent unemployment, particularly among youth.”

In some countries, the youth unemployment rate is double the overall figure, as young people struggle to even enter the job market at the most basic level.

The report warned that many people who have been out of work for a long period are now facing the possibility of losing their unemployment insurance and having to shift to less generous benefits. In many countries, even unemployment benefits are not what they used to be, as many governments have been forced to make big cuts to public spending; the report said average spending per jobseeker in the OECD has fallen around 20 per cent since the crisis began.

The report said there are no quick fixes to unemployment, only the slow work of making labour market reforms. It praised countries like Greece, Italy and Spain that have made such reforms, introduced as part of efforts to tackle their debt problems and turn round their economies.

It also cautioned against falling back on offers of early retirement in the hopes of combatting unemployment, noting that the trend of older workers staying in their jobs longer hasn’t seemed to have an adverse effect on young people.

“Bringing back early retirement schemes or relaxing rules for disability or unemployment benefits for older workers would be a costly mistake,” the report said.

With files from The Associated Press