83092 JobTrends November 2013 • Number 8 Employment Growth in Developing Countries Falls Further as Recovery Stalls Employment outcomes in developing countries did not show period in 2013, and even spiked in Indonesia, from 1.2 to 9.3 improvements in the first quarter of 2013. Although there percent. was a small acceleration in the median growth rate of wages, in In contrast to the trend found in East Asia, Europe and Cen- sharp contrast to the dynamics observed during the first half of tral Asia continued to weaken. Economic growth slowed from 2012, employment growth slowed down and the unemploy- 4.3 to 3.8 percent, although this is mainly explained by lower ment rate increased slightly (figure 1). Most of the slowdown GDP growth in the Russian Federation and Tajikistan. The em- in employment growth took place in Asia and, particularly, in ployment growth rate improved in all countries, but remained Latin America. Even in countries where employment contin- low or even negative in most, keeping the average for the region ued to expand—Brazil, Turkey, and Romania—either the unem- at 1.1 percent. The notable exceptions to this pattern are Roma- ployment rate increased or wages fell. These outcomes can be nia and Turkey, where employment grew at 3.0 and 4.7 percent, explained in part by the slowdown in economic growth start- respectively. Relative to the first quarter of 2012, the unemploy- ing in the second half of 2012. The weak global recovery and ment rate improved slightly for the Europe and Central Asia re- uncertainty during the first half of 2013 regarding fiscal and gion in the first quarter of 2013. Strong declines in unemploy- monetary policies in the United States and Europe could ag- gravate current trends. Figure 1. Median GDP Growth and Labor Market Indicators in Regionally, East Asia drives the aggregate trend in GDP Selected Developing Countries growth and continues to show relatively strong economic per- 8 formance. On average, its GDP growth increased from 5.3 to 7 7.4 6.7 percent between the first quarters of 2012 and 2013, re- 7.2 6.9 6 6.5 6.6 percent spectively. This can largely be attributed to the GDP growth in 6.4 5.9 6.1 China (at 7.7 percent), as well as the sharp rise in Thailand 5 4.6 4.4 4.3 4.5 5.6 (from 0.4 to 5.3 percent) and in the Philippines (6.5 to 7.8 4 3.6 4.4 3.6 3.2 3.9 3.9 3.0 percent). However, the income growth rates in these countries 3 3.3 3.2 3.0 2.8 2.7 have not improved the situation in their labor markets. Their 2 2.5 1.9 2.1 1.8 unemployment rates have, for example, barely budged, which 1 1.3 1.7 1.6 1.4 1.0 1.0 is in line with the overall trend in East Asian labor markets— 0 the average changed from 4.6 to 4.5 percent between the first 11 11 1 11 12 12 12 Q1 2 3 01 1 01 20 20 20 20 20 20 20 /2 /2 quarters of 2012 and 2013. Employment growth has even / / / / / / / Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 fallen from an average of 3.8 to 2.2 percent when comparing GDP growth unemployment rate the first quarter of 2012 with the same period this year. In par- employment growth real wage growth ticular, China’s high employment growth in 2012 (9.9 per- cent) was more than halved in the first quarter of 2013 (4.4 Source: CEIC Data Company, National Statistical Offices, and the International Monetary Fund. percent), which is disproportionate to the moderate decline in Note: Values represent the median value of growth rates estimated for 21 countries: its GDP growth (from 8.1 to 7.7 percent). Real wage growth Armenia, Azerbaijan, Belarus, Brazil, Chile, China, Colombia, Kazakhstan, Lithuania, Mexico, Peru, the Philippines, Romania, the Russian Federation, South Africa, has, however, continued to expand in East Asia, from 4.0 per- Tajikistan, Thailand, Turkey, Ukraine, and the Bolivarian Republic of Venezuela. cent in the first quarter of 2012 to 6.6 percent over the same Human Development Network 1 Poverty Reduction and Economic Management Network Table 1. Labor Market Indicators for Selected Developing Countries GDP growth Employment growth Unemployment rate Wage growth Region Countries Q1/2012 Q1/2013 Q1/2012 Q1/2013 Q1/2012 Q1/2013 Q1/2012 Q1/2013 EAP China 8.1 7.7 9.9 4.8 4.1 4.1 9.0 9.2 EAP Indonesia 6.3 6.0 1.4 1.1 6.3 5.9 1.2 9.3 EAP Philippines 6.5 7.8 3.0 1.5 7.2 7.1 2.5 4.7 EAP Thailand 0.4 5.3 1.0 1.4 0.7 0.7 3.3 3.0 ECA Armenia 4.2 6.1 -1.4 -0.8 20.1 16.9 2.0 19.8 ECA Azerbaijan 1.9 1.9 1.2 1.7 5.4 5.2 8.6 6.3 ECA Belarus 3.0 4.0 -1.8 -1.0 0.7 0.6 -1.2 22.8 ECA Kazakhstan 6.1 4.7 4.0 1.0 5.4 5.3 11.7 0.5 ECA Kyrgyzstan 2.6 3.4 2.7 0.6 2.5 2.5 35.3 -2.6 ECA Lithuania 3.9 3.5 1.3 1.2 14.5 13.1 -0.8 2.5 ECA Moldova 0.9 4.2 -0.6 0.6 7.2 8.1 3.6 4.4 ECA Romania -0.1 2.2 3.2 3.0 5.1 5.6 0.9 0.6 ECA Russian Federation 4.8 1.6 0.9 1.2 6.3 5.8 10.0 4.6 ECA Tajikistan 19.3 12.5 na na 2.6 2.5 0.4 5.3 ECA Turkey 3.3 3.0 3.0 4.7 10.2 10.4 2.2 -1.1 ECA Ukraine 2.2 -1.1 -0.3 0.2 8.4 8.0 5.9 0.7 LAC Brazil 0.8 1.9 1.8 1.9 5.8 5.6 4.5 1.9 LAC Chile 1.1 5.6 2.8 1.5 6.5 6.2 2.3 4.4 LAC Colombia 5.4 2.8 5.2 0.7 10.4 10.2 0.2 2.7 LAC Ecuador 6.8 na 5.7 -1.5 4.9 4.6 4.7 5.2 LAC Mexico 5.0 2.2 3.8 1.4 4.9 4.9 1.6 -1.2 LAC Peru 6.8 5.3 1.0 3.1 8.6 6.1 10.3 -0.1 LAC Venezuela, RB 5.9 0.7 1.0 3.2 9.1 8.2 11.3 -1.4 SSA South Africa 2.4 1.9 2.3 1.5 25.2 25.2 1.0 0.5 EAP Regional average 5.3 6.7 3.8 2.2 4.6 4.5 4.0 6.6 ECA Regional average 4.3 3.8 1.1 1.1 7.4 7.0 6.6 5.3 LAC Regional average 4.5 3.1 3.0 1.5 7.2 6.6 5.0 1.6 Sources: Real GDP growth—main source data: CEIC using countries’ national statistical offices and central bank data, and the International Monetary Fund (IMF) for Moldova. Peru’s estimations use demand-based GDP. Employment growth—main source: CEIC using IMF data; for China, Colombia, Indonesia, Moldova and Tajikistan, data come from national statistical office. Unemployment rate growth—main source: CEIC using IMF data; for Armenia, Colombia, Indonesia, Kazakhstan, Kyrgyzstan, Moldova, Romania and Tajikistan, data come from national statistical office. Real wage growth—main source: CEIC using countries’ national statistical offices, central bank, and IMF data. Data for Colombia and Indonesia reflect wages for the manufacturing sector only. Peru’s data refer to metropolitan Lima only. Philippines data refer to the real minimum wage and refer to all nonagricultural sectors. South Africa real wage growth estimated using February, May, August, and November data. Growth estimated from three-month average real wages except for China, Indonesia, Kyrgyzstan, Lithuania, the Russian Federation, South Africa, Turkey, and to the Bolivarian Republic of Venezuela. ment were experienced particularly for Armenia and Lithuania, ing a general decline over the past quarters for most countries with drops of 3.2 and 1.4 percentage points, respectively. Never- included in the analysis. The Bolivarian Republic of Venezuela theless, looking at previous quarters, there is an upward trend in was hit particularly hard, with its GDP growth plunging from the unemployment rate for the region as a whole. With unem- 5.9 to 0.7 percent, while most other countries saw moderate ployment at 7 percent, it remains higher than the average unem- downward shifts in growth. Only Chile and Brazil managed to ployment rate in the Latin America and Caribbean and East increase their growth rates, from 1.1 to 5.6 percent and 0.8 to Asia and Pacific regions. Furthermore, real wage growth de- 1.9 percent, respectively. Average employment growth also de- clined in the region, falling from 6.6 to 5.3 percent in the first clined for the region, falling from 3 to 1.5 percent, except for quarter of 2012. Peru and the Bolivarian Republic of Venezuela, where employ- In the Latin America and Caribbean region, macroeconomic ment grew from 1 to 3.1 percent and 1 to 3.2 percent, respec- and labor market indicators weakened and showed slower tively. Similarly, the region’s real wage growth dropped from 5 to growth in the first quarter of 2013 compared to the same period 1.6 percent, with Mexico, Peru and the Bolivarian Republic of in 2012. GDP growth dropped from 4.5 to 3.1 percent, follow- Venezuela displaying negative real wage growth. Nonetheless, Human Development Network 2 Poverty Reduction and Economic Management Network the unemployment rate continued to decline in all countries. situation. South Africa’s economic growth continues to decline, This result may be due to, among other factors, a slowdown in and its employment growth has fallen further, from 2.3 to 1.5 the growth rate of the labor force in countries like Chile, Colom- percent, compared to the annual growth recorded in the first bia, and Ecuador. quarter of the previous year. Overall, unemployment remained Finally, the labor market in South Africa, the only Sub-Saha- at 25.2 percent, and real wage growth further contracted from 1 ran African country included in the analysis, remains in a dire to 0.5 percent. JobTrends is a regular series monitoring labor markets in developing countries. It is a collaborative effort between the Human Development Network (HDN) and the Poverty Reduction and Economic Management (PREM) Network of the World Bank. This note was prepared by Gabriel Lara-Ibarra, Ghazala Mansuri, David A. Robalino, and Michael Weber. For more information on this series, contact Ghazala Mansuri, Lead Economist in the Poverty Reduction and Equity Group in the PREM Network, or David A. Robalino, Lead Economist in the Social Protection Unit of HDN. The team gratefully acknowledges financial support from the governments of Austria, Ger- many, the Republic of Korea, Norway, and Switzerland through the Multi-Donor Trust Fund on Labor Markets, Job Creation, and Economic Growth. Human Development Network 3 Poverty Reduction and Economic Management Network