Unemployment Rate Could Double Due to Covid-19 Pandemic
According to S&P Global, job losses across Asia-Pacific could double due to the Covid-19 pandemic- and some of them may take a while to come back.
Shaun Roache, the Chief Economist at S$P Asia Pacific, said the unemployment rate could rise above 3% points- twice as large as the average recession.
According to S$P Global, the services industries feel the effects the most after lockdown, and it’s the very sector driving job creation in countries like Japan and South Korea.
Roache said jobs were at the core of the current economic crisis. He added that measure designed to limit the spread of the virus striking at the heart of job creation across Asia-Pacific’s service sector.
The service sector requires human-to-human contact, while mitigation policies require social distancing.
The projected reduced growth is about 7.5% points. S&P Global has laid out the impact on job losses among major countries in the region.
They are estimated to increase in unemployment rates at their peak – about four quarters after the growth decline.
- Australia: More than 3% points
- Japan: More than 2% points
- South Korea: More than 4% points
- New Zealand: Close to 3% points
- Thailand: Less than 1% point
Social distancing measures are hitting the services sector. It’s worth noting that for every percentage point drop in growth in Asia-Pacific, the rise in the unemployment rate could be more now than in previous cycles.
Asia-Pacific has nine major economies, and the largest increase in the unemployment rate was seen in Hong Kong, Australia, and New Zealand. S&P revealed this after analyzing official data from those countries going back to 1980.
S$P said job busts happen faster than job recoveries. Busts tend to last between 6-8 quarters while recoveries take about 8-10 quarters (or 2-3 years)
The gap is especially high in Hong Kong, Australia, and South Korea.
More than 50% of the population work in the services sector
The services sector is the “most important” employer across the region.
55 out of every 100 workers in Asia Pacific work in the services sector. On the contrary, just 14 of the 100 work in the industrial sector.
Across the Asia-Pacific region, agricultural jobs in China and other emerging markets have disappeared.
But those workers have moved to hotels, malls, or restaurants rather than mostly to factories.
The hospitality sector’s share of China’s total unemployment growth has been 5X larger than the factories over the last 20 years.
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