Recently we’ve seen quite a bit of evidence to support the notion that global demand has never recovered from the 2008 crisis and further, that central banks’ collective efforts to create demand via ‘the wealth effect’ and other similarly elusive concepts have failed. This is apparent virtually everywhere you look, from depressed global trade, to a sharply decelerating China, to flatlining US economic output, to a worldwide deflationary supply glut.
Needless to say, lackluster global demand has a negative impact on employment opportunities. Employment is of course an important factor in explaining economic growth. When jobs are being created at a healthy clip, there is a multiplicative effect on the borader economy as more jobs equals more spending which in turn boosts profits and drives investment in a virutous economic circle. Of course when the jobs gap grows, this circle reverses itself and becomes a self-feeding downward spiral. By studying the global jobs gap and comparing pre-crisis conditions to post-crisis conditions, The International Labor Organization has been able to quantify the economic impact of subpar global demand and it is astonishing.
Here’s more from the new ILO study:
