Organizations are faced with a precarious worldwide economicÂ environment and tight labor market in the first quarter of 2019.
By Larry Basinait
Coming off a strong year in 2018 where unemploymentÂ continued to fall in many countries, global growth in theÂ first quarter of 2019 declined. The International MonetaryÂ Fund cut its outlook for global growth to 3.3 percent thisÂ year, the lowest since the financial crisis of 2009. A rangeÂ of threats are menacing the global economy, including theÂ possible collapse of negotiations between the U.S. andÂ China to end their trade war and the departure of BritainÂ from the European Union without a transition agreement.
But despite concerns about many economies, globalÂ unemployment is forecasted to fall from 5.0 percent inÂ 2018 to 4.9 percent in 2019, as high-income countriesÂ have largely seen a decrease in their unemployment rates.Â An interesting trend in the global workforce is the largeÂ portion (61 percent) of employees reportedly engaging inÂ contingent employment.
United States and Canada
The U.S. has largely seen a continuing tight labor marketÂ as the unemployment rate hovers below 4.0 percent.Â While consumer optimism has stayed relatively high overÂ the past few months, it has tapered off recently as theÂ government shutdown bled into the first quarter of theÂ year. According to the Bureau of Economic Analysis, GDPÂ grew by 3.2 percent in the first quarter of the year.
In March, the U.S. unemployment rate was 3.8Â percent, which marks the fifth consecutive quarterÂ with an unemployment rate of 4.0 or less. Historically,Â unemployment rates at 5.0 percent or just below areÂ considered by many economists to be at or near fullÂ employment. U.S. stocks finished their best quarterÂ in nearly a decade, as several clouds hanging over theÂ financial markets at the end of 2018 dissipated enough toÂ prompt a strong rebound for most shares.
The Canadian unemployment rate increased by 0.2 percentÂ in the first quarter even as private sector job creation hitÂ 300,000 jobs over the past six months, which amasses toÂ the most in any six-month period on record. Real GDP isÂ estimated to expand at an annual rate of 1.6 percent inÂ 2019 even as talks of a recession have increased, thoughÂ rising oil prices have helped keep the economy afloat.
According to an estimate for the region produced byÂ FocusEconomics, the ESA region (East and South Asia) isÂ expected to grow at 5.6 percent in 2019. Export-drivenÂ economies are expected to face headwinds this year fromÂ slow global growth and rising global trade protectionism,Â though accommodative monetary policy and Chinese fiscalÂ policy support activity in the months ahead.
China has by far the largest economy in the region withÂ a GDP of $13.4 trillion and is nearly three times largerÂ than the second biggest economy, Japan. The ChineseÂ manufacturing index rebounded after bottoming outÂ to a three-year low in February. Exports also expandedÂ at the fastest pace in five months in March. EconomicÂ growth is projected to decelerate in 2019 largely due toÂ lower global demand, domestic vulnerabilities, and aÂ continuation to move toward a more sustainable economicÂ model. The unemployment rate of China fell to 3.7 percentÂ for the quarter, which was a slight decline from the firstÂ quarter of last year when the country had a 3.9 percentÂ unemployment rate.
Japan has the second largest GDP in the APAC region at $5Â trillion. The low Japanese unemployment rate in the firstÂ quarter of 2019 remained constant from the first quarterÂ of 2018 at 2.5 percent, even though economic growth wasÂ weak. Economic forecasts for 2019 are a mixed bag. Front-loadedÂ consumer spending ahead of the planned salesÂ tax hike in October and the impact of the investment inÂ the Tokyo 2020 Olympic Games could shore up economicÂ growth this year. On the downside, the economy will feelÂ the pinch of weak global demand, especially from ChinaÂ and Europe. Economists forecast GDP growth of only 0.8Â percent in 2019.
Europe, the Middle East, and Africa (EMEA)
The EMEA region covers three continents and includesÂ 116 different countries which vary greatly in GDP andÂ population. Twenty-seven countries in EMEA are trackedÂ in this quarterly analysis. Mixed results were seen in theÂ quarter with unemployment rates in the overall EMEAÂ region declining year-over-year in 14 of the 27 examinedÂ countries. The biggest decline in the unemployment rateÂ was seen in Austria, where the unemployment rate fell byÂ 1.3 percentage points for the quarter while Egypt saw theÂ biggest decline for the year, down 2.5 percent. Conversely,Â Turkey and Finland reported the largest increase, withÂ unemployment up over 1.5 percentage points for both, toÂ 14.7 percent and 7.0 percent, respectively.
In the first quarter of 2019, the Eurozone economy grewÂ by a tepid 1.2 percent, according to FocusEconomics. AÂ combination of a weak manufacturing sector along withÂ political turmoil and rising protectionism have pushedÂ down consumer sentiment to a two-year low. DespiteÂ the bleak economic news surrounding the Eurozone,Â retail sales jumped in the month of January as householdÂ spending helped boost sales.
Germany has the third largest population in the regionÂ at 82.9 million, but by far the largest GDP ($4 trillion)Â in this region. If Germany struggles, the results keenlyÂ impact the entire region. In the first quarter of 2019, theÂ robust service sector helped steer the German economyÂ out of a recession even as most economic indicators wereÂ mixed throughout the quarter. During the quarter, theÂ unemployment rate dropped from 3.5 percent in the firstÂ quarter of 2018 to 3.2 percent in the first quarter of 2019.
The Latin American economy should improve in 2019 asÂ the region is forecast to experience a 1.9 percent GDPÂ growth for the year, driven by Brazil. Growth is expectedÂ to rise at 2.5 percent in 2020, though political risk,Â predominantly in Argentina, and the fiscal state of otherÂ governments remain a concern within the region.
At the end of 2018, Latin Americaâs largest economy,Â Brazil, reported its lowest unemployment rate in 2.5 yearsÂ at 11.6 percent. However, that has proven short term, asÂ thereâs been an uptick in the unemployment rate to 12.7Â percent in the first quarter of 2019, which in turn erodedÂ consumer confidence to a six-month low. According to theÂ CEIC, the rise in unemployment has been largely due toÂ a decline in consumer spending, which makes up aboutÂ two-thirds of Brazilâs economic output, along with a fall inÂ industrial production.
Mexico is the second-largest country in the region, bothÂ by GDP and population. The Mexican economy continuedÂ to lose steam in the first quarter of the year. IndustrialÂ output and manufacturing both slid on top of flaggingÂ oil production despite strong wage growth and higherÂ consumer confidence. Due to the recent weak economicÂ numbers, there has been a 0.3 percent increase in theÂ unemployment rate from the first quarter of 2018, whichÂ now stands at 3.2 percent.