76062 JobTrends February 2013 • Number 6 Labor Markets in Developing Countries Remain Resilient amidst Declining Growth Employment outcomes in developing countries continued their In Latin America, labor markets also made modest gains de- gradual improvement in the third quarter of 2012. Figure 1 spite the difficult global macroeconomic environment. As in shows median growth rates for output, employment, and wages Europe and Central Asia, unemployment rates fell virtually as well as the median unemployment rate for 12 middle-income across the board. Employment and wage growth were more countries. The slow decline in gross domestic product (GDP) mixed. For example, employment growth declined slightly in growth continued, driven in part by the sluggish recovery in the Brazil, from 2.0 to 1.7 percent, while wage growth dropped sub- developed world, particularly in the European Union and Japan, stantially from 4.1 to 1.8 percent. Employment growth picked which continued to depress aggregate demand and exports. For up significantly in Mexico, from 1.9 to 4.1 percent, while wage this group of 12 developing countries, however, the impact of growth remained constant at a modest rate of 0.5 percent. In this slowing growth has yet to be felt in the labor market. Em- Colombia, where the fall in GDP growth was the largest, from ployment growth edged up from 2.2 to 2.4 percent, and the me- dian unemployment rate declined from 5.7 to 5.3 percent. Only Figure 1. Median GDP Growth and Labor Market Indicators in median wage growth showed slight signs of losing momentum, Selected Developing Countries remaining at a respectable 3.6 percent. These indicators do not capture important labor market outcomes such as underem- 8 7.1 ployment or the types of jobs being created. Nonetheless, based 7 7.0 6.9 6.4 6.1 6.2 on outward appearances, labor markets in developing countries 6 5.7 5.7 5.2 5.3 are continuing their steady recovery following the 2009 finan- 5 4.8 4.7 4.5 4.7 5.0 percent 4.1 cial crisis. 4.0 4 3.4 4.0 4.0 3.6 This resiliency in labor markets is particularly apparent in 3.6 3.3 3.4 3 2.9 2.8 Eastern Europe and Central Asia, the region most vulnerable to 2.5 2 2.4 the continued economic uncertainty in the European Union. 1.8 1.9 2.2 2.1 2.2 1 1.4 Compared to the third quarter of 2011, GDP growth declined 1.2 0.9 0 in 9 out of 12 countries in the selected sample. Remarkably, un- Q3 Q4 0 Q1 Q2 1 Q3 Q4 1 Q1 Q2 2 Q3 employment rates declined or remained unchanged in all but /2 /2 /2 /2 /2 /2 /2 /2 /2 01 01 01 01 01 01 01 01 01 one of the countries for which data are available. However, slow- 0 1 1 2 2 er GDP growth did translate into lower employment growth; GDP growth unemployemnt rate wage growth employment growth half of the countries in the sample experienced a decline in the rate of employment growth. Increases in unemployment may Source: CEIC Data Company, National Statistical Offices, and the International follow in the near future, particularly in countries like Turkey Monetary Fund. Note: The series are median values for a subsample of 12 countries, with complete and Moldova, where GDP and employment growth both slowed series up to Q2 2012 (except GDP for Colombia and República Bolivariana de sharply. In these cases, however, factors such as slowing wage Venezuela; employment growth for Romania; and wage growth for South Africa). The countries included in this figure are Belarus, Brazil, Chile, China, Colombia, Mexico, growth or shrinking populations may be dampening increases in Romania, the Russian Federation, South Africa, Thailand, Turkey, and the Bolivarian unemployment. Republic of Venezuela. 1 Table 1. Labor Market Indicators for Selected Developing Countries GDP growth Employment growth Unemployment rate Wage growth Region Countries Q3/2011 Q3/2012 Q3/2011 Q3/2012 Q3/2011 Q3/2012 Q3/2011 Q3/2012 EAP China 9.1 7.4 4.3 10.4 4.1 4.1 11.6 16.8 EAP Indonesia 6.5 6.2 1.4 1.0 6.6 6.1 na na EAP Philippines 3.6 7.1 2.4 1.3 7.1 7.0 1.5 1.0 EAP Thailand 3.7 3.0 1.4 0.6 0.7 0.6 4.9 5.7 ECA Armenia 2.7 6.2 na na 17.8 16.5 -2.0 3.7 ECA Azerbaijan 0.9 1.5 0.5 1.2 na na 12.5 8.9 ECA Belarus 8.8 2.6 -0.5 -1.8 0.7 0.6 -3.5 29.9 ECA Kazakhstan 7.1 5.2 1.1 3.9 5.5 5.4 -1.3 1.0 ECA Kyrgyz Republic 3.9 -6.6 2.1 1.6 2.5 2.5 14.7 9.2 ECA Lithuania 6.7 4.4 4.3 1.4 15.6 13.3 2.5 4.0 ECA Moldova 7.5 0.8 6.5 -4.0 5.3 4.8 -2.9 4.8 ECA Romania 2.6 -0.6 -2.7 2.4 4.9 5.0 4.4 1.2 ECA Russian Federation 5.0 2.9 1.1 0.6 6.2 5.3 3.8 6.3 ECA Tajikistan 6.5 7.2 na na 2.6 2.6 17.2 15.0 ECA Turkey 8.4 1.6 7.3 2.4 9.0 8.8 8.4 5.0 ECA Ukraine 3.9 3.0 0.0 0.4 6.9 6.6 9.6 7.8 LAC Brazil 2.1 0.9 2.0 1.7 6.0 5.4 4.1 1.8 LAC Chile 3.7 5.7 4.5 1.4 7.4 6.5 2.8 3.6 LAC Colombia 7.5 2.1 3.5 3.0 10.1 10.6 0.1 1.3 LAC Ecuador 9.1 4.7 -0.1 3.7 6.1 5.1 4.9 5.3 LAC Mexico 4.5 3.3 1.9 4.1 5.6 5.2 0.5 0.5 LAC Peru 6.7 6.5 2.3 2.0 7.2 6.6 12.2 13.5 LAC Venezuela, RB 4.4 5.2 1.3 2.3 8.4 8.0 9.1 3.5 SSA South Africa 3.0 2.3 2.6 2.5 25.0 25.5 3.9 2.9 EAP Region average 5.7 5.9 2.4 3.3 4.6 4.5 6.0 7.8 ECA Region average 5.3 2.4 2.0 0.8 7.0 6.5 5.3 8.1 LAC Region average 5.4 4.1 2.2 2.6 7.3 6.7 4.8 4.2 Source: CEIC database, National Statistical Offices, International Monetary Fund, and CISTAT. Notes: Region averages refer to the countries in this table. For some variables, the period of reference is Q2-2012 and Q2-2011. Employment: Armenia, Ecuador, Kyrgyz Republic, Lithuania, Moldova, the Philippines, Romania, and Ukraine. Unemployment rate: Armenia, Ecuador, Kazakhstan, Lithuania, Moldova, Ukraine, and the Bolivarian Republic of Venezuela. Wage growth: Lithuania and South Africa. GDP growth: Armenia, Colombia, Ecuador, Kazakhstan, Moldova, and Tajikistan. For South Africa, earnings come from a firm survey and only represent the formal sector. For China earnings are only representative of urban regions. For LAC region, labor market indicators, except from Mexico, refer to urban areas only. 7.5 to 2.1 percent, employment growth deteriorated slightly ment and real wages. Continued strong growth in Indonesia led from 3.5 to 3 percent and wage growth increased from 0.1 to to further reductions in unemployment, which declined from 1.3 percent. Two important caveats, however, are that the indi- 6.6 to 6.1 percent, while real wages increased moderately in Thai- cators do not capture whether workers are shifting to less pro- land, from 4.9 to 5.7 percent. Only in the Philippines was there ductive sectors and that, except for Mexico, Latin American la- no sign of labor market improvement, despite the recent uptick bor statistics only cover urban areas. in GDP growth. Finally, labor markets in South Africa remained In the four East Asian countries in the sample, workers are weak: employment growth remained steady at 2.5 percent, wage mostly continuing to benefit from brisk growth. Tight labor mar- growth fell from 3.9 to 2.9 percent, and the unemployment rate kets in urban China led to double digit expansions in employ- remained the highest in the sample at 25.5 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 Pov- erty Reduction and Economic Management (PREM) Network of the World Bank. This note was prepared by Javier Arias-Vazquez, Gladys Lopez-Acevedo, and David Newhouse. For more information on this series, contact David A. Robalino, Lead Economist in the Social Protection Unit of HDN, or Gladys Lopez-Acevedo, Senior Economist of the Poverty Reduction and Equity Department of the PREM Network. The team gratefully acknowledges financial support from the governments of Aus- tria, Germany, the Republic of Korea, Norway, and Switzerland through the Multi-Donor Trust Fund on Labor Markets, Job Creation, and Economic Growth. 2