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World — Global job creation grinds to near-halt in September

13 October 2010

The JPMorgan Global Purchasing Managers Index (PMI) survey, compiled by Markit, showed employment barely rose for the second successive month in September 2010, with the rate of job creation slipping closer to stagnation.

Comparisons of the PMI with official labour market data suggest that global employment is just +0.5% higher than a year ago, down from +1% in July.

Service sector jobs fall for second month

Job growth was again led by manufacturing, with services reporting a modest fall in jobs worldwide for the second month running in September. Because services accounts for a far larger share of the economy compared to manufacturing in the developed world than in emerging markets, this has meant employment growth in the developed world has been particularly subdued.

Growth disappoints in all G4 economies

All of the 'G4' developed economies PMI surveys showed disappointing job growth in September. The worst performance was seen in Japan, where jobs were cut at the fastest rate since February. In the UK, employment stagnated, improving on the decline seen in August but nevertheless indicating that the signs of renewed job creation seen earlier in the year have faded.

Meanwhile only modest growth of employment was again recorded in the US and Eurozone, with rising payrolls in the latter driven almost entirely by France and Germany. Employment fell in Italy, Spain and Ireland.

Unemployment set to stay high, subduing consumer spending

The surveys therefore suggest that employment growth may fail to materially affect unemployment rates in the world's largest developed economies, and the situation is set to get worse unless order books pick up soon. This leaves the rate of joblessness at around one-in-ten unemployed in the US and Eurozone and historically high in the UK and Japan.

High unemployment will act as a further drag on fledgling economic recoveries, not least because rising welfare benefits and lower tax takes will exacerbate existing deficit reduction programmes and could force higher government spending cuts elsewhere, but also because it will subdue consumer spending.

With domestic spending failing to rise at a time when external demand is being hit by a slump in global trade flows (the Global PMI showed worldwide exports growing at the slowest rate for over a year in September), the risks have grown that economic growth will fade in many of the developed world's largest economies.

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