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.