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U.S. Report: Economic woes still on horizon

November 4, 2011

Ten months into an already economically shaky 2011, the International Labor Organization (ILO) is predicting that the next six months could see further job loss and economic deceleration. 

On Monday, the ILO released the 2011 World of Work Report, an annual overview of the global labor market. The report’s two most notable predictions, which were much of the focus of the 140-page presentation, claimed that many countries could experience slowed economic growth and an insufficient supply of jobs in the short term. 

“The world economy, which had started to recover from the global crisis, has entered a new phase of economic weakening,” wrote Raymond Torres, director of the ILO’s International Institute for Labor Studies. “Economic growth in major advanced economies has come to a halt and some countries have re-entered recession, notably in Europe. Growth has also slowed down in large emerging and developing countries.”

Rodrigo Bolaños, president of the Central Bank of Costa Rica, has also indicated that he expects decelerated economic growth for the country during the final months of the year. In August, Bolaños lowered gross domestic product growth projections from 4.5 percent to 4 percent. In July, the Economic Commission for Latin America and the Caribbean projected that Costa Rican economic growth would reach only 3.5 percent in 2011 due to slowed revenues in trade and an escalating fiscal deficit. 

Further signs of economic slowdown were observed in the tourism sector this week as Costa Rica’s National Tourism Chamber reported that international tourist arrivals to airports fell 3.9 percent during the third quarter, compared to the same time frame last year. 

The ILO report also forecasted that increasing economic uncertainty and fear of job instability could lead to a decrease in household consumption. A trickle-down effect could follow, with various sectors suffering due to a lack of capital in circulation. 

“The uncertain demand outlook, combined with continued weaknesses in the financial system of advanced economies, is depressing investment in all countries, including in emerging and developing economies, which rely primarily on exports for growth and job creation,” the report stated. “In short, there is a vicious cycle of a weaker economy affecting jobs and society, in turn depressing real investment and consumption, thus the economy, and so on.”

The report also stated that the growing demand for jobs, driven by younger generations entering the workforce, cannot be matched by the shrinking job supply. The result will be an additional job shortage of an estimated 40 million during the next two years, which the report warned could cause potential social unrest. 

“The recent slowdown in economic activity suggests that the world economy is likely to create a little over half of the jobs needed,” the report stated. “Trends in social discontent are associated with both the employment developments and perceptions that the burden of the crisis is shared unevenly.”

According to the United Nations Office on Drugs and Crime’s 2011 Global Study on Homicide, released last month, countries with wide income disparities were found to be four times more likely to be afflicted by violent crime than societies with more equitable wealth distribution. The study demonstrated this relationship with a chart titled “Homicide rate and selected economic variables, Costa Rica 2005-2009.” The graph compared the national homicide rate to fluctuations in inflation rate and GDP in Costa Rica during the time frame of reference. When the consumer price index rose, homicide rates did as well. During the economic recession of 2008-2009, homicide rates hit their highest mark in history. As the economy recovered near the end of 2009, the homicide rate dropped in Costa Rica. 

“An increase in levels of homicide can be noted … with a relationship between percentage change in consumer price index and GDP,” the U.N. report stated. “The recent financial crisis affected not only homicides but also other crimes, particularly property-related crimes.”

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