Economic Stagflation Threatens Productivity and Labor Market recovery in 2023, ILO Report Predicts

A new ILO report indicates that the global labor market is likely to deteriorate in 2023, mainly due to emerging geopolitical tensions and the Ukraine conflict, uneven pandemic recovery, and continuing bottlenecks in global supply chains. Despite variations across the globe, the conditions for stagflation – simultaneously high inflation and low growth – will increase labor complicities for multinational employers in the new future.

Below are highlights for each region:

North America: Labor market tightness reached all-time highs in 2022. However, the number of vacancies started to decline as growth slowed towards the end of the year. Skill shortages is a bigger problem for the employers in the region as a ManpowerGroup survey found that in the United States talent shortages were particularly elevated in 2022 - 74 per cent of employers stated that they had difficulty in finding the talent they needed, compared with 46 per cent in 2018. In Canada the figure was 77 per cent, compared with 41 per cent in 2018.

Latin America: Slowdowns in Brazil and Mexico weighed on the growth performance of Latin America and the Caribbean in 2022, and further decline is expected in 2023. Informal employment, the workforce who is not protected by the government, has increased marginally.

Middle East: There will be inevitable job losses as a result of the transition to a green economy, but there will also be growth in demand for certain occupations and skill sets.

Asia: lagging labor market recovery weighs on the overall recovery across the region. In East Asia, a greater policy focus on expanding social protection is critical for vulnerary workers, aging populations and the ability to sustain future economic shocks. The COVID-19 pandemic has resulted in major disruption of labor migration in the region, especially Southeast Asia, continuously impacting livelihoods in countries of origin and destination.

Europe: After a strong recovery from the pandemic in 2021, the region’s economy slowed down and is expected to slow to 0.7 per cent in 2023. Considerable uncertainty regarding the economic outlook for the region is likely to persist due to the Russian Ukraine conflict and inflations. Unemployment is expected to continue to increase marginally. Government will try to help businesses with inflations and energy crisis.