America exports unemployment amid slump

The Organization for Economic Cooperation and Development, which includes the world’s richest economies, said in a report last week that it expects the number of people out of work in its 30 member nations will rise to 42 million in 2010 from 34 million now as “the financial turmoil that erupted in the United States” has “rapidly spread to the rest of the world.”

Europe and Japan “are at the beginning stages of what we think will be a severe labor-market adjustment,” says JPMorgan’s Hensley.

In Japan, the slump is hurting part-time and contract employees, a growing class of workers who don’t benefit from Japan’s lifetime-employment contracts.

Toyota Motor Corp. will cut half its 6,000 temporary workers by the end of March in response to the global decline, which drove U.S. sales for Asia’s largest auto company down 23 percent in October. Electronics-maker Sharp Corp. said last week it’s considering cutting temporary workers at a plant that makes parts for digital cameras and televisions.

Japan’s jobless rate will jump to 4.4 percent in 2009 from 4 percent, the OECD forecasts. Japanese unemployment peaked at 5.5 percent in 2003, when the country was emerging from its last recession.

Also feeling the fallout from the U.S. downturn are manufacturers in low-cost countries such as China, where American companies have turned for manufacturing.

“China’s economy has acutely felt the impact of the financial crisis,” Yin Weimin, head of the Ministry of Human Resources and Social Security, said on Nov 20. “Some enterprises, particularly labor-intensive small and medium-size enterprises, have gone bankrupt or partially shut down their production capacity and, as a result, many people have lost their jobs.”

Smart Union Group Holdings Ltd., a toymaker that supplies Mattel and Hasbro Inc., shut last month, putting 7,000 people in Dongguan, in Guangdong province, out of work. Half the nation’s toy exporters have closed this year, and 67,000 enterprises filed for bankruptcy in the first six months, according to government figures.

China’s urban unemployment may rise to 4.5 percent by the end of the year from about 4 percent now and “worsen” next year, according to Yin. The figure doesn’t measure job losses among an estimated 200 million migrant workers who have left their hometowns in the countryside to work in the cities.

“U.S. multinationals are facing harder times and scaling back production in the rest of the world, and at the same time there’s a straightforward contraction of imports into the U.S.,” says Marco Annunziata, chief economist at Unicredit MIB in London. “All this means more job losses, as we’re seeing a slowdown in U.S. growth that will impact everywhere.”

Not since the 1930s have unemployment and economic decline been more closely linked across international borders, says Nobel laureate economist Robert Solow, 84, a professor at the Massachusetts Institute of Technology in Cambridge.

“Normally, business cycles are not in synch around the world, and that helps keep them relatively mild,” he says. Now, “there’s a lot more synchronization, and that contributes to the likely depth of the recession.”

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