Unemployment trends in the 21st century

Hannah Norton

Oct 28, 2020

The Great Depression was the single most impactful global unemployment trigger of the 20th century, with some 15 million people unemployed in America alone.1 Now, almost a century later, COVID-19 threatens to mirror the impact of the Great Depression on employment figures around the world.

We have compared statistics from OECD member countries to look at some of the largest unemployment trends of this century to date. The top 3 unemployment rates from OECD member countries are followed from 2000 to 2019.

Please note: Key findings in this piece are based on unemployment reports published by the OECD.

What is the OECD?
The Organisation for Economic Co-operation and Development (OECD) is an intergovernmental economic organisation that works to establish evidence-based international standards. The OECD is comprised of 37 member countries who work with other countries, organisations and stakeholders to find solutions to a variety of economic, social and environmental challenges.

Unemployment across OECD member countries from 2000-2020

 

 

2000 – 2005: Start of a new century

In the first few years of the 21st century, the OECD average figure stayed relatively stagnant, with a moderate unemployment rate that sat between 6.14% and 6.61%.2

The Russian financial crisis in 1997 kick-started a period of economic inactivity that continued through to the start of the new century.3

2006 – 2008: Era of improvement

Despite the Global Financial Crisis (GFC) occurring from 2007 – 2008, the mid-late 00s saw the average OECD unemployment figure improve from 6.6% to an impressive 5.96%. The world economy was in a state of positive growth, particularly with growing employment and falling unemployment rates.12 The effects of the GFC didn’t appear full force for many countries until a few years later.

Interestingly, when the earlier effects of the GFC started to kick in, the construction industry was more highly affected in countries such as Ireland and Spain due to a large boom in residential construction.13 Sharply rising housing prices meant that the construction industry was in strife even before there was a decline in total employment.

Spain was one of the first countries to quickly fall into recession as a result of the GFC and to this day, still hasn’t clawed its way back to the rates it held before the crisis.14 The figure from 2008 (as seen below) reflected a 3% leap from 8.2% the previous year.

2009 – 2013: Global Financial Crisis (GFC) repercussions lead to major negative downturn

Before COVID-19, the major worldwide economic event of the 21st century was the Global Financial Crisis – or the GFC. According to the Reserve Bank of Australia, increased borrowing and more relaxed loan processes from US lenders were significant factors that led to the GFC.16

While it began in the United States, foreign banks were also involved in these lending practices within the American housing market, which in turn led to other nations being affected.17

The GFC left a lasting impact on several countries for years to come – especially those in Europe.

The next few years became tangled up in a major global recession, which brought the OECD average from 5.96% to 8.16% in a single financial year (2008 – 2009).

2014 – 2019: Road to recovery

2014 saw the beginning of financial recovery and a positive transformation in the average unemployment rate, which would only continue to improve every year leading up to the present.

Apart from Greece and Spain, every OECD member country that experienced a downturn directly after the GFC have seen their unemployment rates decrease to levels close to where they were before the crisis. In some instance, they’re even lower.

2020: Repeat of a century?

By studying OCED data it can be seen that unemployment spikes occur, on average, every 10 years. Although we are only 5 years from the last peak in figures, we can’t ignore the scale of COVID-19 and the implications it is likely to have on the global economy.

In comparison, the 1918 influenza (Spanish Flu) saw a minimum of 20 million deaths.28 This led to a shortage in labour availability resulting in higher wages.29

 

Countries with consistently low unemployment over the 21st century

The average unemployment percentage across all OECD countries in the last 20 years has been 6.66%. The following countries have always stayed below that mark:

  • Austria – peaked at 6.01% in 2016
  • Japan – peaked at 5.36% in 2002
  • Korea – peaked at 4.4% in 2000
  • Mexico – peaked at 5.38% in 2009
  • New Zealand – peaked at 6.37% in 2012
  • Norway – peaked at 4.68% in 2016
  • Switzerland – peaked at 5.06% in 2004 and 2005.

 

Protect yourself if the worst happens
While most income protection policies do not offer support for those who are unemployed, there are many insurers that will provide cover if you’re unable to work due to sickness or injury. Having income protection for sickness and injury can be invaluable, as it can help to continue to pay bills while you recover. Find cover today using our easy income protection comparison tool.

Disclaimer: We do not compare all life insurers or products in the market. Any advice given above is general advice and does not consider your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances, and before you make any decision about whether to buy a product, you should read the Product Disclosure Statement (PDS) for that product.

Sources

  1. https://www.history.com/topics/great-depression/great-depression-history
  2. https://data.oecd.org/unemp/unemployment-rate.htm OECD (2020), Unemployment rate (indicator). doi: 10.1787/52570002-en (Accessed on 29 June 2020)
  3. Ibid
  4. Ibid
  5. https://www.eurofound.europa.eu/publications/article/2002/the-dynamics-of-unemployment-from-1990-to-2002
  6. https://www.mfa.gov.lv/en/policy/european-union/history/latvia-and-the-eu-chronology-of-relations
  7. https://wol.iza.org/articles/the-labor-market-in-poland/long Lewandowski, P., Magda, I. The labor market in Poland, 2000−2016. IZA World of Labor 2018: 426 doi: 10.15185/izawol.426
  8. Ibid
  9. https://www.eesc.europa.eu/resources/docs/qe-30-12-151-en-c.pdf
  10. https://www.rba.gov.au/publications/rdp/2015/pdf/rdp2015-14.pdf (Page 9)
  11. Ibid
  12. https://www.un.org/en/development/desa/policy/wesp/wesp_archive/2008wesp.pdf
  13. https://www.oecd.org/els/emp/impactoftheeconomiccrisisonemploymentandunemploymentintheoecdcountries.htm
  14. Ibid
  15. Ibid
  16. https://www.rba.gov.au/education/resources/explainers/the-global-financial-crisis.html
  17. Ibid
  18. Ibid
  19. https://www.abacademies.org/articles/aafsjvol16si12012.pdf#page=75 (Page 87)
  20. https://www.cfr.org/timeline/greeces-debt-crisis-timeline
  21. https://www.europarl.europa.eu/RegData/etudes/note/join/2013/507491/IPOL-EMPL_NT(2013)507491_EN.pdf
  22. https://www.pewresearch.org/fact-tank/2016/01/28/us-eu-neet-population/
  23. https://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/—publ/documents/publication/wcms_670542.pdf pg 50
  24. https://www.oecd.org/spain/Employment-Outlook-Spain-EN.pdf
  25. https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_309217/lang–en/index.htm
  26. https://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/—publ/documents/publication/wcms_670542.pdf page 53
  27. https://www.heritage.org/index/pdf/2020/countries/turkey.pdf
  28. https://www.euro.who.int/en/health-topics/communicable-diseases/influenza/pandemic-influenza/past-pandemics
  29. https://www.stlouisfed.org/~/media/files/pdfs/community-development/research-reports/pandemic_flu_report.pdf