IMF Urges Action to Tackle Unemployment, Create Jobs

Conference aims to make unemployment more prominent in policy discussion

Recovery in advanced economies too tepid to reduce unemployment much

More can be done to support output growth, create jobs

The conference on “The Challenges of Growth, Employment, and Social Cohesion,” the first of its kind, is sponsored by the Norwegian government and will be chaired by ILO Director-General Juan Somavia and IMF Managing Director Dominique Strauss-Kahn. Ahead of the conference, IMF Chief Economist Olivier Blanchard spoke to IMF Survey online about the objectives of the conference and what may result.

IMF Survey online: Why is the IMF helping to organize this conference?

Blanchard: We want to make unemployment, and the costs of unemployment, more prominent in current policy discussions. We need growth—but we need growth that increases employment. An economic recovery that does not translate into more jobs will not mean much for most people. People may not notice whether growth is 1 percent or 3 percent. In contrast, whether unemployment is 10 percent or 5 percent is a very big deal, not just for the pain it imposes on the unemployed but for the anxiety it creates for many of the employed. And when you realize that the crisis has led so far to 30 million more people becoming unemployed, you get a sense of the immense human cost of the crisis.

Blanchard: “I hope that Oslo does reaffirm the need for coordination in aggregate demand policies across countries over the medium run” (IMF photo)

IMF Survey online: From this perspective, how do you view the economic outlook?

Blanchard: It’s a mixed picture. In advanced countries, there is an output recovery, but it is just too tepid to bring about a rapid decline in unemployment. It is easy to understand the gap in perceptions between Wall Street and Main Street. Unemployment remains high, particularly in countries such as the United States and Spain. Long-term unemployment is alarmingly high: in the U.S. for instance half of the unemployed have been out of work for over six months, something we have not seen since the Great Depression. The employment outlook is better among emerging markets and developing countries than in the advanced countries. Still, those working particularly in export sectors have suffered from the crisis.

IMF Survey online: What do we know about the costs of the recent increase in unemployment?

Blanchard: We read about it daily in the newspapers—the strain on the...