IMF Fears 'Social Explosion' From World Jobs Crisis

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America and
Europe face the worst jobs crisis since the 1930s and risk "an
explosion of social unrest" unless they tread carefully, the
International Monetary Fund has warned.

"The labour
market is in dire straits. The Great Recession has left behind a
waste land of unemployment," said Dominique Strauss-Kahn, the
IMF’s chief, at an Oslo jobs summit with the International Labour
Federation (ILO).

He said a double-dip
recession remains unlikely but stressed that the world has not yet
escaped a deeper social crisis. He called it a grave error to think
the West was safe again after teetering so close to the abyss last
year. "We are not safe," he said.

A joint IMF-ILO
report said 30m jobs had been lost since the crisis, three quarters
in richer economies. Global unemployment has reached 210m. "The
Great Recession has left gaping wounds. High and long-lasting unemployment
represents a risk to the stability of existing democracies,"
it said.

The study cited
evidence that victims of recession in their early twenties suffer
lifetime damage and lose faith in public institutions. A new twist
is an apparent decline in the "employment intensity of growth"
as rebounding output requires fewer extra workers. As such, it may
be hard to re-absorb those laid off even if recovery gathers pace.
The world must create 45m jobs a year for the next decade just to
tread water.

Olivier Blanchard,
the IMF’s chief economist, said the percentage of workers laid off
for long stints has been rising with each downturn for decades but
the figures have surged this time.

"Long-term
unemployment is alarmingly high: in the US, half the unemployed
have been out of work for over six months, something we have not
seen since the Great Depression," he said.

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September
15, 2010

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