COVID-19 puts 25 million jobs at risk

As the world continues to grapple with the global health crisis brought about by COVID-19, the economic fallout from the outbreak is likely to have long-term repercussions for global financial markets.

Releasing a new assessment note, COVID-19 and the world of work: Impact and responses, the International Labour Organisation (ILO) predicted a rise in global unemployment of between 5.3 million and 24.7 million from a base level of 188 million in 2019. By comparison, the 2008-9 global financial crisis increased global unemployment by 22 million.

“This is no longer only a global health crisis, it is also a major labour market and economic crisis that is having a huge impact on people,” said ILO director-general Guy Ryder.

Exacerbating the situation is the looming spectre of a biting global recession, with United Nations chief Antonio Guterres warning that a global recession, “perhaps of record dimensions”, is a “near certainty.”

Goldman Sachs economists forecast a 24% hit to US second-quarter GDP, following a 6% decline in the first quarter, due to COVID-19. The bank also expects unemployment in the US to surge to 9% and full-year GDP for 2020 to fall 3.8% on an annual average basis. Bank of America, meanwhile, says a recession is already in place. “Jobs will be lost, wealth will be destroyed and confidence depressed,” Michelle Meyer, the bank’s US economist, wrote in a note.

In Asia, key financial hubs are unlikely to be spared the economic brunt of COVID-19. In Singapore, economists expect the economy to contract between 0.3-0.5% for 2020 while Hong Kong, already driven into deep recession after months of political unrest, saw unemployment rate hit a 9-year high of 3.7% in February.

The ILO’s Ryder called for the same leadership and resolve that produced a united front that successfully navigated the consequences of the 2008 financial crisis. Two key tools, he identified, can help mitigate damage and restore public confidence.  “Firstly, social dialogue, engaging with workers and employers and their representatives, is vital for building public trust and support for the measures that we need to overcome this crisis,” said Ryder.

“Secondly, international labour standards provide a tried-and-trusted foundation for policy responses that focus on a recovery that is sustainable and equitable. Everything needs to be done to minimise the damage to people at this difficult time.”