Written by: Sneha Elavarasan
As the world continues to grapple with the effects of the COVID-19 pandemic, economists are predicting that an upcoming recession is looming. The economic fallout caused by the pandemic has been unprecedented, with entire industries coming to a standstill and unemployment rates soaring. While the world economy showed signs of recovery towards the end of 2021, the emergence of new variants of the virus and the reintroduction of lockdown measures in several countries has once again cast a shadow over the global economic outlook (1). The pandemic has caused major disruptions to the labor market, with many people losing their jobs due to business closures and reduced demand for goods and services (2). In this article, we will explore the upcoming recession and its impact on unemployment statistics.
Unemployment Rates – The Decline
Unemployment rates across the globe have risen sharply in the wake of the pandemic. In the United States, for example, the unemployment rate peaked at 14.7% in April 2020, the highest rate since the Great Depression (4). While the rate has since dropped to 4.2%, it remains well above pre-pandemic levels of around 3.5%. Similarly, in the European Union, the unemployment rate stood at 6.9% in December 2021, up from 6.2% in December 2019 (6).
The impact of the pandemic on employment has been felt differently across different countries and regions. In countries such as the United States and the United Kingdom, where there is a strong social safety net, workers have been able to access unemployment benefits and other forms of support (9). However, in many developing countries, where social safety is weaker, workers have been left without support, leading to increased poverty and hardship.
COVID-19 has had an effect on employment across many economic sectors (3). However, certain industries have been hit harder than others. The travel and hospitality industries have been particularly hard hit, with many businesses forced to close due to lockdown measures and reduced demand for travel and tourism (7). Similarly, the entertainment and events industries have been severely impacted, with many venues forced to close and events canceled.
The manufacturing sector has also been affected by this, with supply chain disruptions and reduced demand for goods leading to layoffs and little to no working hours. Even the healthcare sector, which has been on the frontlines of the pandemic, has been affected, with many hospitals and clinics forced to furlough staff due to reduced demand for non-COVID-19 services (7). Many people have found at-home alternatives for simple medical purposes, for example, a small fever or cough.
Unemployment and Gender
The impact of the pandemic on employment has been felt most acutely among certain groups, such as young people and low-wage workers. In the United States, for example, the unemployment rate for workers aged 16 to 24 was 10.4% in December 2021, well above the overall unemployment rate of 4.2% (5). Similarly, low-wage workers have been hit particularly hard, with many working in industries such as hospitality and retail that have been severely impacted by the pandemic.
The pandemic has also had a disproportionate impact on women, who have been more likely than men to lose their jobs due to the pandemic. This is due in part to the fact that women are overrepresented in industries such as healthcare and education, which have been particularly hard hit by the pandemic (8). Additionally, many women have been forced to leave the labor force due to the closure of schools and daycare centres, which has made it difficult for them to balance work and family responsibilities.
While it is impossible to predict with certainty whether or not a recession will occur, all the signs point towards a potentially challenging economic environment. Governments around the world are taking steps to try and mitigate the impact of the pandemic and the potential recession, but it is unclear whether or not these measures will be enough. It is likely that businesses will need to be agile and adaptable in order to weather the economic storm and emerge on the other side.
The upcoming recession is a cause for concern for businesses and consumers alike. While there are many factors contributing to the potential economic downturn, it is clear that the ongoing pandemic, rising inflation are major challenges affecting unemployment that must be addressed. By being proactive and taking steps to mitigate the impact of these challenges, businesses and individuals can increase their chances of success in the face of economic uncertainty.
- Markovitz, Gayle, and Kateryna Karunska. “Chief Economists’ Outlook, January 2023, Predicts Financial Turbulence.” World Economic Forum, January 16, 2023. https://www.weforum.org/agenda/2023/01/chief-economists-outlook-business-prepare-recession-davos-2023/.
- Nam, Rafael, and Greg Rosalsky. “A Recession Might Be Coming. Here’s What It Could Look Like.” NPR. NPR, January 24, 2023. https://www.npr.org/2023/01/24/1150319679/recession-slowdown-inflation-interest-rates-jobs-employment-economy#:~:text=In%20a%20recent%20poll%20of,recession%20with%20a%20small%20r.
- “Chief Economists Outlook: January 2023.” World Economic Forum, January 16, 2023. https://www.weforum.org/reports/chief-economists-outlook-jan-2023.
- Long, Heather, and Andrew Van Dam. “U.S. Unemployment Rate Soars to 14.7 Percent, the Worst since the Depression Era.” The Washington Post. WP Company, May 9, 2020. https://www.washingtonpost.com/business/2020/05/08/april-2020-jobs-report/.
- Gould, Elise, and Melat Kassa. “Young Workers Hit Hard by the COVID-19 Economy: Workers Ages 16–24 Face High Unemployment and an Uncertain Future.” Economic Policy Institute, October 14, 2020. https://www.epi.org/publication/young-workers-covid-recession/.
- “Unemployment Statistics.” EuroStat Statistics Explained, January 2023. https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Unemployment_statistics.
- Abaricio, Mark Daniel. “Top 5 Industries Most Affected by Recession in 2023.” KDCI, November 29, 2022. https://www.kdci.co/blog/top-5-industries-most-affected-by-recession-in-2023/.
- “Labour Force Survey, December 2021.” Statistics Canada, January 7, 2022.https://www150.statcan.gc.ca/n1/daily-quotidien/220107/dq220107a-eng.htm
- Ando, Sakai, Ravi Balakrishnan, and Bertrand Gruss. “European Labor Markets and the COVID-19 Pandemic.” INTERNATIONAL MONETARY FUND, March 2022.