86816 JobTrends March 2014 • Number 9 Stagnant GDP Growth Rates Accompanied Continued Sluggish Employment Growth in Developing Countries Employment outcomes continued to show almost no improve- Indonesia was the exception: after a period of high real wage ment in most developing countries over the second quarter of growth between 2011 and 2012, wages adjusted downward 2013 as gross domestic product (GDP) growth rates stagnated. from 17.1 percent in the second quarter of 2012 to -1.4 in the Employment growth took a modest hit, dropping to 0.9 per- second quarter of 2013. cent, while the unemployment rate barely moved. Real wage Europe and Central Asia present a mixed picture with re- growth was the only outcome showing improvement, but the spect to GDP growth. While around half of the countries—Ka- 3.2 percent growth rate found in the second quarter of 2013 zakhstan, Lithuania, Moldova, and Turkey—showed increases in was practically half of the rate for 2012 (figure 1). In this same GDP growth, growth in the other half weakened, with Armenia, period, decreases in employment growth were more pronounced Belarus, and Ukraine actually contracting. The employment in East Asia and Latin America, where employment growth was growth rate remained low throughout the region at 1 percent. halved. Real wage growth also dropped by half in these regions, Turkey registered the highest employment growth rate in the while in East Europe and Central Asia, real wage growth stum- region with 3.5 percent, whereas the growth rate improved the bled to 2.9 percent. Overall, the slowdown in economic growth and in employment that started in the second half of 2012 con- tinued unabated through the second quarter of 2013, driven by Figure 1. Median GDP Growth and Labor Market Indicators in Selected Developing Countries weak GDP growth and uncertainties regarding the pace of re- covery in the developed world. 8 Comparing the second quarter of 2012 with the second 6.9 6.8 quarter of 2013, East Asia as a region sustained relatively high 7 6.6 6.3 6.2 5.9 6.0 5.9 GDP growth, but this was driven mostly by China and the Phil- 6 6.4 5.6 5.0 5.8 ippines, each with growth rates surpassing 7.5 percent. In con- 5 4.7 percent 4.7 trast, both Thailand and Indonesia saw declines in GDP growth 4 4.8 4.3 3.8 3.8 4.6 3.6 3.4 3.5 3.1 (from 4.4 to 2.9 percent and from 6.3 to 5.8 percent, respec- 3 2.8 3.4 2.5 3.2 2.2 2.2 tively), leaving the region overall with a GDP growth rate of 2 1.9 1.7 2.5 1.3 around 6 percent. This was not the case with employment 1.2 1.1 0.9 1 growth or with unemployment. While unemployment barely 0 budged, employment growth plummeted from an average of 4 1 1 1 2 2 2 2 3 3 01 01 01 01 01 01 01 01 01 percent in the second quarter of 2012 to 1.7 percent in the sec- /2 /2 /2 /2 /2 /2 /2 /2 /2 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 ond quarter of 2013. China’s high employment growth in 2012 (10.3 percent) was almost halved in the second quarter of 2013 GDP growth unemployment rate (5.8 percent), for example, despite more or less steady growth in employment growth real wage growth GDP. Although employment stagnated or declined, real wages Source: Author’s calculation using CEIC, IMF and National Statistical Offices data. appear to have grown in most East Asian countries. Real wages Note: Values represent the median value of growth rates estimated for 20 countries: in the Philippines rose from 1 percent in the second quarter of Armenia, Belarus, Brazil, Chile, China, Colombia, Ecuador, Kazakhstan, Kyrgyzstan, Lithuania, Mexico, Peru, Philippines, Romania, the Russian Federation, South Africa, 2012 to 3.6 percent in the second quarter of 2013, for example. Thailand, Turkey, Ukraine, and the Bolivarian Republic of Venezuela. Human Development Network 1 Poverty Reduction and Economic Management Network Table 1. Labor Market Indicators for Selected Developing Countries GDP growth Employment growth Unemployment rate Real wage growth Region Countries Q2/2012 Q2/2013 Q2/2012 Q2/2013 Q2/2012 Q2/2013 Q2/2012 Q2/2013 EAP China 7.6 7.5 10.3 5.8 4.1 4.1 8.1 8.5 EAP Indonesia 6.3 5.8 1.2 0.5 6.2 6.1 17.1 -1.4 EAP Philippines 6.3 7.6 2.8 -0.1 6.9 7.5 1.0 3.6 EAP Thailand 4.4 2.9 1.6 0.7 0.9 0.7 2.8 4.5 ECA Armenia 7.2 -3.1 -3.2 1.1 17.4 16.2 28.0 -0.7 ECA Azerbaijan 0.0 na 1.1 2.1 5.3 5.1 7.5 4.2 ECA Belarus 2.7 -0.5 -2.0 -0.8 0.7 0.5 15.5 19.2 ECA Kazakhstan 5.2 5.8 3.9 0.8 5.3 5.2 12.4 0.1 ECA Kyrgyzstan 5.7 5.7 2.1 0.8 2.6 2.4 21.2 -2.7 ECA Lithuania 1.8 3.8 0.7 0.1 13.3 11.7 1.1 2.6 ECA Moldova 1.8 6.3 -3.0 1.5 4.5 4.7 4.2 0.4 ECA Romania 2.0 1.4 3.4 2.0 4.6 4.8 2.6 1.0 ECA Russian Federation 4.3 1.2 1.7 -0.7 5.3 5.4 10.4 6.3 ECA Tajikistan 16.8 5.5 na na 2.6 2.5 4.4 2.9 ECA Turkey 2.8 4.5 3.0 3.5 8.4 9.0 3.0 -1.3 ECA Ukraine 3.0 -1.3 0.8 0.7 7.1 6.9 5.6 2.6 LAC Brazil 0.6 3.3 2.1 0.5 5.9 5.9 3.2 3.6 LAC Chile 4.6 3.9 1.7 2.2 6.6 6.1 3.0 4.6 LAC Colombia 4.9 3.9 5.3 0.9 10.0 9.2 0.2 3.4 LAC Ecuador 5.6 3.8 5.2 1.0 5.2 4.9 5.2 5.8 LAC Mexico 4.5 0.5 4.4 0.5 4.9 4.9 1.1 -0.2 LAC Peru 6.4 5.9 2.0 2.5 6.6 5.8 4.6 2.6 LAC Venezuela, R.B. 5.6 2.6 2.3 2.4 8.0 7.5 5.6 -8.9 SSA South Africa 2.9 2.3 2.5 2.0 24.9 25.6 6.0 1.2 EAP Regional average 6.2 6.0 4.0 1.7 4.5 4.6 7.3 3.8 ECA Regional average 4.4 2.7 0.8 1.0 6.4 6.2 9.7 2.9 LAC Regional average 4.6 3.4 3.3 1.4 6.7 6.3 3.3 1.6 Sources: Real GDP growth—main source data: CEIC using countries’ national statistical offices and central bank data, and the International Monetary Fund (IMF) for Moldova. Peru’s estimations use demand-based GDP. Employment growth—main source: CEIC using IMF data; for China, Colombia, Indonesia, Lithuania, Mexico, Moldova and Tajikistan, data come from national statistical office. Unemployment rate growth—main source: CEIC using IMF data; for Armenia, Colombia, Indonesia, Kazakhstan, Kyrgyzstan, Moldova, Romania and Tajikistan, data come from national statistical office. Real wage growth—main source: CEIC using countries’ national statistical offices, central bank, and IMF data. Data for Colombia and Indonesia reflect wages for the manufacturing sector only. Peru’s data refer to metropolitan Lima only. Philippines data refer to the real minimum wage and refer to all nonagricultural sectors. South Africa real wage growth estimated using February, May, August, and November data. Growth estimated from three-month average real wages except for China, Indonesia, Kyrgyzstan, Lithuania, Russia, South Africa, Turkey, and the Bolivarian Republic of Venezuela. most in Armenia and Moldova. The Russian Federation experi- to drop from 4.6 to 3.4 percent. Mexico was hit strongest: GDP enced negative employment growth (from 1.7 percent in the growth dropped from 4.5 percent in the second quarter of 2012 second quarter of 2012 to -0.7 percent in the second quarter of to 0.5 percent in the second quarter of 2013. The region’s em- 2013). Compared to the second quarter of 2012, the unemploy- ployment growth rate also fell substantially, from 3.3 to 1.4 per- ment rate improved slightly for the Europe and Central Asia re- cent. The extent of this decline is largely driven by drops in em- gion over the same period in 2013. Overall, real wage growth ployment growth in Colombia and Ecuador. The regional showed significant declines, dropping from 9.7 percent in the unemployment rate decreased marginally from 6.7 percent in second quarter of 2012 to less than a third of that rate (2.9 per- the second quarter of 2012 to 6.3 percent in the second quarter cent) in the second quarter of 2013. Armenia, Kazakhstan, and of 2013. Real wage growth accelerated in many countries in the Kyrgyzstan show particularly steep declines in wage growth, region, except for the Bolivarian Republic of Venezuela, Mexico, while Belarus’ and Lithuania’s real wage growth improved. and Peru. The average value, however, declined from 3.3 percent In the Latin America and Caribbean region, GDP growth de- in the second quarter of 2012 to 1.6 percent in the second quar- clined in all countries except Brazil, leading the regional average ter of 2013, reflecting the drop registered by the Bolivarian Re- Human Development Network 2 Poverty Reduction and Economic Management Network public of Venezuela, where real wages contracted in the second ing this period employment growth also fell from 2.5 to 2 quarter of 2013. percent, and the unemployment rate grew from 24.9 to 25.6 The South African economy showed signs of further dete- percent. The largest decrease in employment-related outcomes rioration. GDP growth decreased from 2.9 in the second quar- was registered by the real wage growth, which plummeted ter of 2012 to 2.3 percent in the second quarter of 2013. Dur- from 6 to 1.2 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 Poverty Reduction and Economic Management (PREM) Network of the World Bank. This note was prepared by Gabriel Lara Ibarra, Ghazala Mansuri, David A. Robalino, and Michael Weber. For more information on this series, contact Ghazala Mansuri, Lead Economist in the Poverty Reduction and Equity Group in the PREM Network, or David A. Robalino, Lead Economist in the Social Protection Unit of HDN. The team gratefully acknowledges financial support from the governments of Austria, Germany, the Republic of Korea, Norway, and Switzerland through the Multi-Donor Trust Fund on Labor Markets, Job Creation, and Economic Growth. Human Development Network 3 Poverty Reduction and Economic Management Network