As I noted earlier this week, the recession seems to be easing its grip. In fits and starts, recovery is likely to get under way in coming months in most major economies. That is good news—especially compared to the gloom and fear earlier this year. But the bad news is that the social cost of the crisis is set to keep rising for some time. Unemployment—the symbol of the Great Depression—will get nowhere near the levels of the 1930s. But in advanced economies, jobless rates are already much higher than they have been for a long time.
The U.S. jobless numbers announced today give some encouragement, with a sharp decline in the number of jobs lost last month and an unexpected easing in the jobless rate. But, as a lagging indicator, unemployment worldwide is still expected to go on increasing well into 2010. The International Labor Organization thinks that as many as 50 million people could lose their jobs before this is all over. Of course, in emerging and low-income countries, where social safety nets are weak or non-existent, the human cost from unemployment is even higher.
This puts the pressure—quite rightly—on policymakers to continue corrective policies, to fix the financial system and boost aggregate demand. It also has led the IMF to pay attention in our lending to what Managing Director Dominique Strauss-Kahn has called social conditionality.
The IMF has been criticized in the past for paying too little attention to the social costs that come when countries are hit by economic crisis. Recent programs in countries from Belarus to Côte d'Ivoire and Pakistan have carved out some room to protect the most vulnerable. That will help. But the most important boost to living standards will come when the recovery has taken firm hold around the world.
Next week, I will hand over the blog to Ajai Chopra. He will lay out some interesting new research on Europe. Others will pick up after him, commenting on our work in the runup to the IMF-World Bank the Annual Meetings in October in Istanbul.
What do we hope to accomplish there? Of course, it will give an opportunity to take stock of the global financial crisis and the policy measures so far. But looking forward, participants will also debate the shape of the global economy to come. They will want to set policy for the way ahead. How can we resolve the crisis, without burdening future generations with too much debt, and build a lasting recovery? These are complex issues, and we’ll be looking into some of them over coming weeks on this Blog.