But productivity remains key to escaping the clutches of the financial crisis, says PwC report.
Almost seven years on from the global financial crisis and a broad based global rebound remains elusive. But one of the most damning and tangible metrics of the crisis – the huge upturn in unemployment in the G7 – is moving decisively in the right direction in most economies.
In simple terms, and at an aggregate level, there are more jobs in the G7 and E7 now than there were before the crisis. There are now around 4.5 million more jobs, in net terms, across the G7 than there were at the end of 2007. This figure takes into account the overall number of jobs created and lost during the period.
Canada has led the way with the biggest percentage increase in employment, as its economy was the first of the G7 to regain its pre-crisis GDP level. And in absolute terms, Germany and the US have created over 4 million jobs between them. The financial crisis didn’t have the same impact on the labour market in the E7, as around 90 million jobs have been created over the same period.
But in the last year the pace of job creation has decelerated in some of these economies. For example, in the past year the economies of Mexico, Turkey and Brazil combined created around 300,000 jobs, compared to around 2.7 million a year on average between 2007 Q4 and 2013 Q4.
And when it comes to job creation, a key factor is the type of jobs created. In the US and across Europe the trend has been rising part-time employment, with part-time job creation outperforming full-time employment gains in most of the economies in the sample.
Only the UK and Germany have posted growth in both full- and part-time employment. And full-time employment has fallen in the other Eurozone economies. Says PwC senior economist Richard Boxshall: “These findings suggest that the next phase of the labour market recovery will be to increase the number of full-time workers, which will support faster economic growth.”
But the number of jobs created is only one measure of economic performance. Another important measure is labour productivity. Says Richard Boxshall: “To truly escape the clutches of the financial crisis, now is the time to put productivity growth at the top of the political and business agenda.”
The economists used GDP per hour worked to measure productivity in the G7; but used GDP per person employed in the E7, as hourly employment data is not available for each economy.
The analysis shows: Amongst the G7, Canada and Germany have managed to combine high employment growth with a strong increase in labour productivity. This is in contrast to other high-performing economies like the US, where productivity growth has outperformed employment, and the UK where the reverse is true.
One way to offset China’s shrinking workforce is to move workers from low-cost manufacturing into higher-skilled occupations. PwC’s analysis shows this process is already underway, with productivity in China around 60% higher than in 2008. This implies China has moved up the value chain.
Amongst the E7, Mexico and Turkey have witnessed the biggest percentage increase in employment, due to increases in the labour force. In the long-term, these economies will become more reliant on productivity rises to fuel economic growth. The star emerging market performers in terms of combining high employment and productivity growth are India and Indonesia.