22 April 2019

Job Creation In Developing Markets Slowing

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As the job market in the Unites States slowing down, the pace of job growth is starting to slow in developing countries. Unemployment in the U.S. fell to 7.4% in July with 162,000 new jobs created, slightly lower than the consensus expectations of 180,000 new jobs. This is well below the average monthly figures of 202,000 reported January through June.

In a report in The Economist last week, it was found that many of the developing markets are starting to show signs of stagnant GDP and job growth, just as many developed markets have been experiencing recently. According to the article, 2013 will be the first year in which emerging markets will account for more than half of the world GDP on the basis of purchasing power. This is in sharp contrast to 1990, where “they accounted for less than a third of a much smaller total.”

Between 2003 and 2011, the GDP provided by the emerging economies grew at more than a percentage point a year. This rapid growth in the world economy marks the biggest economic transformation in modern history, and the magazine claims it is unlikely to be seen again.

According to a recent study by Arvind Subramanian and Martin Kessler of the Washington-based Peterson Institute, between 1960 and the late 1990s, just 30% of countries in the developing world managed to increase their output per person faster than America did, thus achieving what is called “catch-up growth.” The “catch-up” growth was relatively steady with the gap closing at 1.5% per year, but in the 1990s research shows that 73% of developing countries managed to outpace U.S. growth at an average of 3.3% annually.

While emerging markets will continue to become a larger factor in the world GDP, it appears the pace has slowed. Growth rates in the BRIC markets have dropped and the growth in other developing markets will not likely have the same impact as the BRIC-fueled growth in the 1990s and 2000s. The chances are low that growth in other emerging economies will have the same impact in the near-term as that of the BRICs in the recent past.

Many developing markets are starting to show parallels with the U.S. economy. With their explosive growth, their size will not fuel the world economy as they have in the past. The growth in the BRIC economies will be at a slower pace. Additionally, while creating millions of new jobs, the demographics in many countries is ageing. The days of big population booms and resulting economic opportunity are not likely in the BRIC nations. Instead, population growth will most likely be seen in Africa, where the economic boom will not be felt for decades.
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