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Employment rose to a record high across developed economies in the second quarter despite the growing pressures of high inflation and rising interest rates, according to data published on Thursday.
The share of the working-age population in employment in the OECD’s 38 member countries rose above 70 per cent for the first time in records going back to 2005, the Paris-based organisation said. This reflected record highs in more than two-thirds of countries, as well as in the EU and eurozone overall.
Workforce participation also rose to its highest level in records stretching back to 2008, among both men and women, with 73.7 per cent of the working-age population either in work or seeking work. Even Italy — which has the lowest share of women in work in the EU — registered its best performance yet on both measures, as did France, Germany and Japan.
Economists give several explanations for the persistent strength of jobs markets even as the economic backdrop has weakened: ageing populations and changing lifestyles that have led to labour shortages; a pandemic-fuelled wave of public sector hiring; and concerted efforts in countries such as France to tackle longstanding problems with youth unemployment through subsidised training programmes.
Unemployment has begun to tick up in some countries, including the US and UK, since the middle of the year. Joblessness among young men — often an early indicator of a broader labour market downturn — has also risen slightly. But the overall rate remained at a record low in August across the OECD, EU and euro area, the OECD said.
“Resilience remains the name of the game in the labour market, in the face of slowing labour market activity,” Melanie Debono, of the consultancy Pantheon Macroeconomics, said in a note published last week after the latest data from the eurozone painted a similar picture.
The strength of the jobs market has raised hopes that central banks will be able to quash high inflation without the painful waves of job losses that have accompanied past periods of rapid tightening in monetary policy.
But it has also allowed workers to press for higher wage growth — especially in countries such as the UK where workforce participation still remains well below previous peaks. Central banks fear this could fuel high inflation and force them to keep interest rates high for longer.
Although lay-offs are now becoming more widespread, and wage growth slowing, “the overall impression is that of a return to normal after an over-exuberant post-pandemic recovery, rather than a material slowdown”, said Tamara Basic Vasiljev, at the consultancy Oxford Economics. “This might make higher-for-longer interest rates necessary.”
“High inflation and resulting pressure it puts on household finances is probably one factor driving the rise in labour participation,” said Annabelle Mourougane, OECD Head of Trade and Productivity Statistics.
Mourougane added other trends — ranging from increasing economic uncertainties and pension reforms to gains in educational attainments and increasing female participation rates — could also be playing a role.