A further sharp slowdown in emerging market economies (EMEs) is weighing on global activity and trade, and subdued investment and productivity growth is checking the momentum of the recovery in the advanced economies. Supportive macroeconomic policies and lower commodity prices are projected to strengthen global growth gradually through 2016 and 2017, but this outcome is far from certain given rising downside risks and vulnerabilities, and uncertainties about the path of policies and the response of trade and investment.
Labour markets should continue to improve in the major OECD economies.
● The OECD-wide unemployment rate has declined by 1 percentage point since 2013, amidst improved job growth. A further decline of 1⁄2 percentage point is projected over 2016-2017, with employment continuing to rise by just under 1% per year. This pace is below that observed in 2014-15, with demographic factors limiting the feasible pace of job growth in the United States and Japan (Aaronson et al., 2014). Unemployment is projected to decline to, or stay below, pre-crisis rates in the United States and Japan, but remain comparatively high in the aggregate euro area (Figure 1.6), where persisting negative supply effects from past demand weakness are relatively strong and there remains considerable cross-country dispersion in labour market developments.
● Wage pressures are set to remain moderate, although some upturn is likely as price inflation and productivity growth pick up and unemployment declines (Figure 1.6). Labour market slack is, however, more extensive than suggested by claimant-based unemployment rates alone. Broader measures of unemployment, incorporating part- time workers who want to work full-time and inactive persons wanting to work (but not actively seeking a job), remain well above pre-crisis norms in many economies, including the United States and the euro area. This may help to damp wage growth for some time to come.