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Published: Tuesday, 7/16/2013

Joblessness to keep rising, OECD forecasts

BY JULIA WERDIGIER
THE NEW YORK TIMES

LONDON — The social impact of the European economic crisis shows little sign of abating, with unemployment in Spain, Greece and other southern European economies expected to continue to rise through next year, the Organization for Economic Cooperation and Development said in a study published Tuesday.

Joblessness will continue to edge up, to about 28 percent in Spain and Greece, 12.5 percent in Italy and 11 percent in France by the end of 2014, the Paris-based OECD said in its forecast. Young people and people with few skills will be affected the most, said the organization, which represents 34 of the world’s largest economies.

Two of the biggest exceptions to the trend are the United States and Germany, where the number of people out of work is expected to decline further next year, the study said.

“The social scars of the crisis are far from being healed,” said Ángel Gurría, secretary-general of the organization.

Unemployment in many developed economies has been rising steadily since the financial crisis started in 2008. People on short-term contracts, especially younger and lower-skilled workers, were often the first to be fired when the crisis started and struggled to find work, the organization said.

In May, Chancellor Angela Merkel of Germany declared youth unemployment Europe’s biggest challenge. And some governments, including France, pledged new measures to try to reduce joblessness.

But some economists said that government labor policies to improve the employment situation, including apprenticeship programs, can do only so much. “It’s more about boosting firms’ confidence and easing access to credit and maybe further easing of austerity,” said Jennifer McKeown, an economist at Capital Economics.

The OECD warned against trying to address youth unemployment by turning to early retirement programs or relaxing unemployment benefits for older workers, saying that would be “a costly mistake.” The organization cited new evidence that although workers tended to retire later because of better health or financial need, they did not do so at the expense of younger workers.

Holger Schmieding, chief economist at Berenberg Bank, agreed with that assessment, saying that European demographics and the growing financial demands of pensions made it necessary for people to work longer. But Schmieding was less pessimistic than the OECD He said that while more bad news on unemployment was already “baked into the cake,” labor markets should stabilize as the economic environment improves, probably over the summer.

“Unemployment is a lagging economic indicator, and even if the economies stabilize there may be pressure, but it doesn’t have to get quite as bad as the OECD forecasts,” he said.

The organization also said that governments should spend more on helping the unemployed train and search for jobs. Spending per job seeker fell on average almost 20 percent among OECD countries since the beginning of the crisis.



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