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JULY 2012  •  NUMBER 4
Employment in Developing Countries Continues to Gradually Recover

  • Employment growth in selected middle-income countries continued its steady recovery despite moderate output growth, although these economies may face difficulties reabsorbing workers re-entering the labor force after the crisis.
  • Labor markets in Europe and Central Asia have continued their steady recovery from the 2009 financial crisis, and four East Asian countries continued to experience improved employment and wage growth.
  • Slowing economic growth has not prevented labor markets from improving in Latin American countries in the sample, but the effects have been more mixed in South Africa.

Figure 1. Median Growth Rates for Sample of Middle-Income Countries

Source: CEIC Data Company, National Statistical Offices, and the International Monetary Fund (IMF).
Note: The series are median values for a subsample of 12 countries with complete series up to the first quarter of 2012 (except GDP for Turkey; employment growth for Armenia, Belarus, and the Kyrgyz Republic; and unemployment rate for Armenia and Belarus). The countries included in this figure are Armenia, Belarus, Brazil, Chile, Colombia, the Kyrgyz Republic, Mexico, Romania, Russia, the Philippines, Thailand, and Turkey.

In a sample of middle-income countries, employment growth continued its steady recovery despite moderate output growth. Figure 1 shows median growth rates for output, employment, and wages as well as the median unemployment rate for 12 middle- income countries. Gross domestic product (GDP) continued to grow at a respectable pace of 4.6 percent in the first quarter of 2012, even with the threat of financial and fiscal deterioration in parts of the European Union. This continued economic growth helped to sustain a 2.9 percent growth in employment in the first quarter of 2012, along with modest wage growth. However, the median unemployment rate partly reversed its recent decline, increasing from 5.8 to 6.2 percent. This unemployment increase, amidst increasing employment, suggests that economies are beginning to face difficulties reabsorbing workers re-entering the labor force after the crisis.

Labor markets in Europe and Central Asia have continued their steady recovery from the 2009 financial crisis. Table 1 shows that compared to its level a year ago, average unemployment in the sample of 12 European and Central Asian countries fell nearly 1 percentage point in the first quarter of 2012, to 7.1 percent. Declines in unemployment were particularly striking in Lithuania, Moldova, Romania and the Russian Federation. In these countries, all of which were severely affected by the crisis, unemployment fell by an average of 1.2 percent. Turkey, whose labor market largely escaped the crisis, continued to enjoy declining unemployment and positive employment growth, as well as wage growth of 6.1 percent. Nonetheless, the Turkish economy is slowing sharply, with GDP growth falling from 9.3 to 3.2 percent.

In the Latin American countries in the sample, labor markets appear to be improving, despite a slowdown in economic growth. After a rapid recovery from the crisis the previous year, growth in Brazil stagnated in 2011 due to the continued turmoil in European markets and the sharper than expected slowdown in China. The same factors also affected Chile, where despite strong domestic demand, growth fell from nearly 10 to 6 percent. Despite slower growth, however, labor market recovery continued largely unabated, with unemployment falling 0.8 percentage points in Chile and 0.5 in Brazil, although employment growth decelerated slightly in both countries. Unemployment also fell substantially in the urban areas of Colombia and Ecuador, due in part to continued manufacturing growth in much of the Latin America region in 2011. Mexico also continued its gradual recovery. Although GDP growth remained roughly constant at 4.5 percent, employment growth rose to nearly 4 percent and real wages increased slightly.

Four East Asian countries continued to experience improved employment and wage growth. China saw a slight deceleration of its growth rate, as GDP growth fell 1.6 percentage points. However, the slowdown has yet to hit the urban labor market: employment growth increased by 6.2 percentage points to 9.9 percent and wages rose rapidly. This strong employment growth did little to decrease unemployment, which remained a low 4 percent, as higher wages enticed inactive workers and more migrants into the urban labor force. Unlike in China, strong growth in Indonesia and the Philippines did reduce unemployment. Even in Thailand, where growth was heavily affected by floods in 2011, wage and employment growth accelerated.

In the only African country in the sample, South Africa, slower economic growth had mixed effects on labor markets. Declining commodity prices reduced GDP growth to a weak 2 percent, which led to a slight increase in the extraordinarily high unemployment rate and a slight decline in wage growth. Nevertheless, employment growth in South Africa improved considerably, from 0.3 to 2.3 in the first quarter of 2012.

Table 1. Labor Market Indicators for Selected Developing Countries
Region Countries GDP growth Employment growth Unemployment rate Wage growth
Q1/2011 Q1/2012Q1/2011 Q1/2012Q1/2011 Q1/2012Q1/2011 Q1/2012
EAP China 9.7 8.1 3.7 9.9 4.1 4.1 11.6 14.6
EAP Indonesia 6.5 6.3 3.6 1.4 6.8 6.3 5.6 0.9
EAP Philippines 4.6 6.4 0.8 3.0 7.4 7.2 1.5 2.5
EAP Thailand 3.2 0.3 0.5 1.2 0.8 0.7 4.4 9.4
ECA Armenia 1.9 4.7 -0.7 -8.1 17.8 16.5 -5.5 1.6
ECA Azerbaijan 1.6 0.5 0.4 1.2 na na 0.3 4.6
ECA Belarus 10.9 3.0 0.5 -1.7 0.7 0.6 25.1 -1.7
ECA Kazakhstan 7.3 7.5 2.7 1.7 5.6 5.3 9.1 12.7
ECA Kyrgyz Republic 3.2 -6.4 -1.0 3.7 2.6 2.5 -3.3 32.4
ECA Lithuania 5.9 3.9 -1.2 0.9 17.1 13.9 1.1 2.1
ECA Moldova 8.4 1.0 -4.8 6.9 7.5 6.2 3.4 3.5
ECA Romania 0.3 0.3 1.5 3.5 6.5 5.2 -7.3 0.8
ECA Russian Federation 4.0 4.9 2.1 0.7 7.5 6.5 1.6 10.3
ECA Tajikistan 6.5 7.2 na na 2.3 2.6 8.5 18.7
ECA Turkey 9.3 3.2 6.5 2.9 11.4 10.2 10.5 6.1
ECA Ukraine 3.7 4.7 0.1 -0.3 8.7 8.4 10.9 14.4
LAC Brazil 4.2 0.8 2.3 1.8 6.3 5.8 6.5 4.6
LAC Chile 9.9 5.6 6.2 2.8 7.3 6.5 2.9 2.3
LAC Colombia 5.0 4.7 3.1 5.2 12.7 11.8 0.6 0.1
LAC Ecuador 7.0 6.1 -0.1 3.7 6.1 5.1 6.4 4.7
LAC Mexico 4.5 4.6 1.0 3.8 5.1 5.0 -0.9 0.1
LAC Peru 8.8 6.0 na na na na 5.4 9.2
LAC Venezuela RBD 4.8 5.6 0.3 -0.5 8.9 8.2 -7.5 11.3
SSA South Africa 3.4 2.1 0.3 2.3 25.0 25.2 1.5 -0.7
EAP Region average 6.0 5.3 2.2 3.9 4.8 4.6 5.8 8.8
ECA Region average 6.1 5.5 0.6 1.0 8.0 7.1 4.5 8.8
LAC Region average 6.3 4.8 2.1 2.8 7.8 7.1 1.9 4.6
Source: CEIC database, National Statisical Offices, International Monetary Fund.
Note: Region averages refer to the countries in this table. For some variables, the period of reference is Q4-2011 and Q4-2010, employment—Armenia, Belarus, Ecuador, Kazakhstan, the Kyrgyz Republic, Lithuania, Moldova, and Venezuela; unemployment rate—Armenia, Belarus, Ecuador, Kazakhstan, Lithuania, Moldova, and Venezuela; wage growth— Lithuania and South Africa; GDP growth—Ecuador, Kazakhstan, and Ukraine. For South Africa, earnings come from a firm survey and only represent the formal sector; for China, earnings are only representative of urban regions; for LAC region, labor market indicators, except from Mexico, refer to urban areas only.

JobTrends is a regular series monitoring labor markets in developing countries. It is a collaborative effort between the Human Development Network (HDN) and the Poverty Reduction and Economic Management (PREM) Network of the World Bank. This note was prepared by Javier Arias-Vazquez, Gladys Lopez-Acevedo, and David Newhouse. For more information on this series, contact David A. Robalino, Lead Economist in the Social Protection Unit of HDN, or Gladys Lopez-Acevedo, Senior Economist of the Poverty Reduction and Equity Group of the PREM Network. The team gratefully acknowledges financial support from the governments of Austria, Germany, the Republic of Korea, Norway, and Switzerland through the Multi-Donor Trust Fund on Labor Markets, Job Creation, and Economic Growth.