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GLOBALUNEMPLOYMENT REPORTYEAR END 2016

One of the biggest challenges that HR professionals face is the recruitment of high-quality talent in the face of increasing talent shortages and an ever-changing employment landscape. It is becoming more and more difficult to find the “best fit” talent that is needed to fill important and highly specialized roles. To adapt to this new challenge, many organizations are turning to the untapped talent pools that lie in global markets. This strategy provides an opportunity for companies to benefit from international economic and population growth while simultaneously strengthening their global brand.

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GLOBALUNEMPLOYMENT REPORTYEAR END 2016

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To explore international labor markets, companies must first consult global labor market data. PeopleScout, a global provider of RPO, MSP and Total Workforce Solutions, has partnered with HRO Today Magazine to produce quarterly reports that compile current international labor market figures, including measures like national Gross Domestic Product (GDP) and unemployment rates over time, from countries across the globe. This data reveals critical information about the state of the talent pool, working conditions, and recruitment needs of various countries and regions. This data is essential in predicting fruitful locations for expansion and recruitment, thereby allowing multinational companies to stay competitive in talent acquisition.

However, HR professionals should exhibit caution when interpreting the results in this document. What constitutes unemployment isn’t cut and dry; even countries with long-standing practices in reporting unemployment periodically change criteria. Some countries adjust unemployment estimates because of seasonality, and some do not. The definition of full-time employment and who should count as a member of the labor force varies by country. Therefore, comparing unemployment rates between advanced countries like the United States and middle-income countries like China is very difficult. In China, the picture is complicated further by nearly 300 million rural migrant workers who are almost entirely ignored by unemployment statistics. When most migrant workers lose their jobs they return to their homes in the countryside.

When looking at the unemployment rate, trends matter most, though one cannot ignore the implications of widely different rates between countries. For example, the unemployment rate in Greece is 23.0 percent, while in Germany it is below 4.0 percent. The conclusion is that while unemployment rates between countries may not be calculated consistently, there are still proportionately far more Greeks unemployed than Germans.

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ANALYSISUnderstanding unemployment rates necessitates the need for more information about the overall economic environment from which they derive. Global economic growth is forecast to accelerate moderately to 2.7 percent in 2017. Growth in advanced economies is expected to increase to 1.8 percent in 2017, according to the World Bank’s January 2017 Global Economic Prospects report.¹ Fiscal stimulus in major economies—particularly in the United States—could generate faster domestic and global growth than projected, although rising trade protection under the Trump administration could have adverse effects. Growth in emerging markets and developing economies as a whole should rise to 4.2 percent in 2017 from 3.4 percent in 2016.

In December, the U.S. unemployment rate fell to 4.8 percent from 5.0 percent in 3Q 2016. For the year, the rate remained below 5.0 percent, suggesting stability in the American job market. There has been much discussion about the U.S. relationship with Mexico with the arrival of the Trump administration and renewed calls for isolationism, but the relationship remains an important one for both countries. It is estimated that nearly five million U.S. jobs depend on trade with Mexico.²

The Canadian unemployment rate also fell slightly from 7.0 percent in 3Q 2016 to 6.8 percent. This marks an improvement from last year’s rate of 7.1 percent.

NORTH AMERICA

Economic growth in the East Asia and Pacific region is projected to decrease slightly to 6.2 percent in 2017 as slowing growth in China is moderated by a pickup in the rest of the region. Output in China is anticipated to slow to 6.5 percent in 2017. Macroeconomic policies are expected to support domestic drivers of growth despite soft external demand, weak private investment, and overcapacity in some sectors in China. Excluding China, growth in the region is will advance at a more rapid 5.0 percent rate in 2017.³(Continued on next page)

¹ World Bank’s January 2017 Global Economic Prospects https://openknowledge.worldbank.org/handle/10986/25823² U.S.-Mexico Economic Relations: Trends, Issues, and Implications M. Angeles Villarreal Specialist in International Trade and Finance November 4, 2016³ World Bank’s January 2017 Global Economic Prospects

ASIA-PACIFIC

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Economic growth in the EMEA region is projected to pick up to 2.4 percent in 2017, driven by the growth of commodity-exporting economies and recovery in Turkey. The forecast depends on a recovery in commodity prices and an easing of political uncertainty. Furthermore, Russia’s economy is expected to grow 1.5 percent this year, as the adjustment to low oil prices is completed.6

The German economy is the largest in the EMEA region, with a GDP of Intl. $3,980 billion. Unemployment fell to 3.9 percent in 4Q 2016, down from 4.5 percent one year ago. Russia, the second largest economy in the region, reported an unemployment rate of 5.6 percent, up from 5.3 percent in 3Q 2015, but below the 4Q 2015 level of 5.1 percent.

The United Kingdom is the third largest economy in EMEA. Unemployment in the fourth quarter fell slightly to 4.8 percent, down from 5.1 percent in 3Q 2016. (Continued on next page)

EMEA

ASIA-PACIFIC cont’d

The Chinese GDP is reported at Intl.4 $21,269 billion annually, more than twice the next largest economy in the region, India, which reported a GDP of Intl. $8,721 billion annually.

In the fourth quarter of 2016, China reported an unemployment rate of 4.0 percent, a rate consistent with its reports of the last five quarters. India’s unemployment level fell to 4.9 percent from 5.2 percent the prior year. India reports unemployment on an annual basis only. While China’s reports are more frequent, they must also be taken with a grain of salt. As the Financial Times put it recently, “China’s official unemployment statistics are the worst of a notoriously unreliable set,”5 pointing out that the unemployment rate has fluctuated between just 4.0 percent and 4.3 percent despite the fact that quarterly, year over year growth has been as high as 14.0 percent and as low as 6.0 percent.

Japan, the third-largest economy in Asia-Pacific, maintained a low unemployment rate of 3.1 percent, down from 3.2 percent at the end of 2015.

The APAC country with the largest improvement in unemployment in the past quarter is once again the Philippines, improving from 5.4 percent in 3Q 2016 to 4.7 percent in 4Q 2016. This is a year-over-year improvement of nearly a full percentage point (0.9 percent).

5 Anderlini, Jamil, “Opaque jobs picture poses hidden threat to China’s ‘new normal’,” Financial Times, January 2015 https://www.ft.com/content/00df52de-a077-11e4-9aee-00144feab7de

4 Intl. $ is a hypothetical unit of currency that has the same purchasing power parity that the U.S. dollar had in the United States at a given point in time. It is widely used in economics.

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6 World Bank’s January 2017 Global Economic Prospects7 Gibbs, Alexandra, The UK economy is not showing signs of a slowdown following the Brexit vote, CNBC 26, January 2017 http://www.cnbc.com/2017/01/26/uk-gdp-sees-06-rise-in-fourth-quarter-beating-expectations- and-matching-06-posted-in-third-quarter.html8 Parietti, Melissa, 5 Economic Challenges Spain Faces in 2016, Investopedia, 24 January, 2016. www.investopedia.com/articles/investing/012416/5-eco-nomic-challenges-spain-faces-2016.asp9 Foreign Investment in Africa, A sub-Saharan Scramble, The Economist, January 2015

EMEA cont’d

The British economy showed no signs of losing momentum at the end of 2016, with growth of 0.6 percent in the fourth quarter and 2.2 percent in 2016 overall. These figures highlight that growth remained resilient for the two quarters following the Brexit vote, though the “hard Brexit” expected on the horizon will lead to much economic uncertainty in the U.K. in 2017.7

Greece remains troubled by extraordinarily high unemployment at 23.0 percent, or nearly a quarter of the workforce. Although high, the unemployment rate is down from 24.6 percent one year ago, the unemployment rate in Greece is moving in the right direction.

While only the seventh largest economy in EMEA region, Spain also suffers from painfully high unemployment at 18.9 percent. However, there are signs the job market is improving. The high unemployment rate declined 1.1 percent since last quarter and 4.8 percent since last year. But the unemployment rate will only improve to a limited degree because the youngest in Spain suffer the most from unemployment. At the end of 2014, the unemployment rate for individuals between ages 15-24 was 51.8 percent. The number of workers with indefinite contracts has fallen while temporary contracts are on the rise, and the few jobs that are available are limited to temporary or part-time work. A receptive attitude toward public assistance may be encouraging joblessness in Spain, and some are calling the prolonged employment crisis in Spain symptomatic of producing a lost generation.8

There has been a considerable corporate investment in Africa in recent years. According to EMPEA, in 2014 alone private equity funds raised in Africa exceeded $4 billion. “Consumer demand is growing, and industries are being liberalized.”9 In fact, The International Monetary Fund estimates that the real GDP of sub-Saharan Africa as a whole grew by 5.8 percent in 2015. Foreign investments in natural resources, increased public spending on infrastructure and better agricultural production combined to help local economies accelerate. The fast-growing youth population and urbanization is expected to drive over 50 percent of Africans to cities by 2050.

(Continued on next page]

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10 World Bank’s January 2017 Global Economic Prospects

EMEA cont’d

But challenges are abundant. The 4Q 2016 unemployment rate in South Africa - the largest economy of the 48 in the sub-Saharan category - remains the highest in the region at 26.5 percent. This is up from 25.5 percent a year ago.

The implications of the high unemployment rates in these three nations are that there may be an ample supply of candidates to fill positions, thereby lowering payroll cost and time-to-hire. International companies may want to take advantage of comparably favorable labor costs.

Latin America is projected to return to positive growth in 2017, expanding by 1.2 percent. Brazil is projected to expand at a 0.5 percent pace after easing domestic constraints. Weakening investment in Mexico due to policy uncertainty in the United States is anticipated to result in a modest deceleration of growth this year to 1.8 percent. A rolling back of fiscal consolidation and strengthening investment is expected to support growth in Argentina, which is forecast to grow at a 2.7 percent pace in 2017.10

Brazil is the largest economy in Latin America, with a GDP of Intl. $3,134 billion. It also suffers from the region’s highest unemployment at 12.0 percent. The unemployment rate rose nearly four percentage points from December 2015.

The Mexican economy is the second largest in the region. This quarter, its quarterly unemployment fell to 3.4 percent, an improvement of 0.65 percent from one year ago.

The importance of the relationship between the United States and Mexico was noted earlier regarding its impact on U.S. jobs. Mexico is the United States’ second largest export market, third largest overall trading partner, and the top country of origin for immigrants living in the country.

LATIN AMERICA

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About HRO Today Magazine

HRO Today Magazine and newsletters are read by more than 140,000 HR executives and leaders worldwide and covers the latest industry trends in HR outsourcing, services, shared services and operations. HRO Today Magazine is the publication of choice for the most senior executives facing the strategic decisions about operational excellence. HRO Today and www.hrotoday.com offer the best content choices for the HR leaders seeking online information in the form of newsletters, webinar series and online video content. HRO Today is a product of SharedXpertise.

PeopleScout, a TrueBlue company, is trusted by businesses in North America and around the world for Recruitment Process Outsourcing (RPO), Managed Service Provider (MSP) and blended Total Workforce Solutions. PeopleScout consults with clients to solve complex hiring challenges and achieve their growth and revenue goals. PeopleScout provides cost-effective delivery of scalable, integrated and highly customized staffing solutions to more than 70 countries world-wide, with offices in Chicago, Charlotte, Sydney, Krakow, Gurgaon, Beijing, Toronto and Montreal. PeopleScout is a recognized leader in innovative talent management solutions, repeatedly honored as an RPO and MSP industry leader. Learn more at www.peoplescout.com.

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