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Mapped: Unemployment Forecasts, by Country in 2023

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Unemployment Forecast

Unemployment Forecast

Mapped: Unemployment Forecasts, by Country in 2023

As 2022 clearly illustrated, the global job market can surprise expectations.

So far, this year is no different. The unemployment rate in six of the G7 countries hovers near the lowest in a century. With an unemployment rate of 3.4%, the U.S. jobless rate hasnโ€™t fallen this low since 1969.

But as some economies navigate a strong labor market against high inflation and hawkish monetary policy, others are facing more challenging conditions. In the above graphic, we map unemployment forecasts in 2023 using data from the IMF’s World Economic Outlook.

Uncertainty Clouds the Surface

Across many countries, the pandemic has made entrenched labor trends worse. It has also altered job market conditions.

South Africa is projected to see the highest jobless rate globally. As the most industrialized nation on the continent, unemployment is estimated to hit 35.6% in 2023. Together, slow economic growth and stringent labor laws have prevented firms from hiring workers. Over the last two decades, unemployment has hovered around 20%.

Country / Region
2023 Unemployment Rate (Projected)
๐Ÿ‡ฟ๐Ÿ‡ฆ South Africa35.6%
๐Ÿ‡ธ๐Ÿ‡ฉ Sudan30.6%
๐Ÿ‡ต๐Ÿ‡ธ West Bank and Gaza25.0%
๐Ÿ‡ฌ๐Ÿ‡ช Georgia19.5%
๐Ÿ‡ง๐Ÿ‡ฆ Bosnia and Herzegovina17.2%
๐Ÿ‡ฆ๐Ÿ‡ฒ Armenia15.1%
๐Ÿ‡ฒ๐Ÿ‡ฐ North Macedonia15.0%
๐Ÿ‡จ๐Ÿ‡ท Costa Rica13.2%
๐Ÿ‡ง๐Ÿ‡ธ The Bahamas12.7%
๐Ÿ‡ช๐Ÿ‡ธ Spain12.3%
๐Ÿ‡ฌ๐Ÿ‡ท Greece12.2%
๐Ÿ‡จ๐Ÿ‡ด Colombia11.1%
๐Ÿ‡ฒ๐Ÿ‡ฆ Morocco10.7%
๐Ÿ‡ธ๐Ÿ‡ท Suriname10.6%
๐Ÿ‡น๐Ÿ‡ท Turkiye10.5%
๐Ÿ‡ง๐Ÿ‡ง Barbados10.0%
๐Ÿ‡ฆ๐Ÿ‡ฑ Albania10.0%
๐Ÿ‡ต๐Ÿ‡ฆ Panama10.0%
๐Ÿ‡ท๐Ÿ‡ธ Serbia9.7%
๐Ÿ‡ฎ๐Ÿ‡ท Iran9.6%
๐Ÿ‡บ๐Ÿ‡ฟ Uzbekistan9.5%
๐Ÿ‡ง๐Ÿ‡ท Brazil9.5%
๐Ÿ‡ฎ๐Ÿ‡น Italy9.4%
๐Ÿ‡ฐ๐Ÿ‡ฌ Kyrgyz Republic9.0%
๐Ÿ‡จ๐Ÿ‡ป Cabo Verde8.5%
๐Ÿ‡จ๐Ÿ‡ฑ Chile8.3%
๐Ÿ‡ง๐Ÿ‡ฟ Belize8.0%
๐Ÿ‡ต๐Ÿ‡ท Puerto Rico7.9%
๐Ÿ‡บ๐Ÿ‡พ Uruguay7.9%
๐Ÿ‡ฆ๐Ÿ‡ผ Aruba7.7%
๐Ÿ‡ซ๐Ÿ‡ท France7.6%
๐Ÿ‡ต๐Ÿ‡ช Peru7.5%
๐Ÿ‡ธ๐Ÿ‡ป El Salvador7.5%
๐Ÿ‡ธ๐Ÿ‡ช Sweden7.4%
๐Ÿ‡ซ๐Ÿ‡ฎ Finland7.4%
๐Ÿ‡ฒ๐Ÿ‡บ Mauritius7.4%
๐Ÿ‡ช๐Ÿ‡ฌ Egypt7.3%
๐Ÿ‡ฑ๐Ÿ‡ป Latvia7.2%
๐Ÿ‡ณ๐Ÿ‡ฎ Nicaragua7.2%
๐Ÿ‡ฑ๐Ÿ‡น Lithuania7.0%
๐Ÿ‡ฆ๐Ÿ‡ท Argentina6.9%
๐Ÿ‡ช๐Ÿ‡ช Estonia6.8%
๐Ÿ‡ง๐Ÿ‡ณ Brunei Darussalam6.8%
๐Ÿ‡ฒ๐Ÿ‡ณ Mongolia6.6%
๐Ÿ‡ญ๐Ÿ‡ท Croatia6.6%
๐Ÿ‡จ๐Ÿ‡พ Cyprus6.5%
๐Ÿ‡ต๐Ÿ‡น Portugal6.5%
๐Ÿ‡ต๐Ÿ‡ฐ Pakistan6.4%
๐Ÿ‡ต๐Ÿ‡พ Paraguay6.4%
๐Ÿ‡ธ๐Ÿ‡ฐ Slovak Republic6.2%
๐Ÿ‡ฉ๐Ÿ‡ด Dominican Republic6.2%
๐Ÿ‡จ๐Ÿ‡ฆ Canada5.9%
๐Ÿ‡ฆ๐Ÿ‡ฟ Azerbaijan5.8%
๐Ÿ‡ธ๐Ÿ‡ฒ San Marino5.7%
๐Ÿ‡ง๐Ÿ‡ช Belgium5.6%
๐Ÿ‡ท๐Ÿ‡ด Romania5.5%
๐Ÿ‡ซ๐Ÿ‡ฏ Fiji5.5%
๐Ÿ‡ต๐Ÿ‡ญ Philippines5.4%
๐Ÿ‡ฎ๐Ÿ‡ฉ Indonesia5.3%
๐Ÿ‡ฉ๐Ÿ‡ฐ Denmark5.3%
๐Ÿ‡ฑ๐Ÿ‡ฐ Sri Lanka5.0%
๐Ÿ‡ฑ๐Ÿ‡บ Luxembourg5.0%
๐Ÿ‡ฎ๐Ÿ‡ช Ireland4.8%
๐Ÿ‡ฐ๐Ÿ‡ฟ Kazakhstan4.8%
๐Ÿ‡ฌ๐Ÿ‡ง United Kingdom4.8%
๐Ÿ‡ง๐Ÿ‡ฌ Bulgaria4.7%
๐Ÿ‡ฆ๐Ÿ‡น Austria4.6%
๐Ÿ‡ญ๐Ÿ‡ณ Honduras4.6%
๐Ÿ‡บ๐Ÿ‡ธ U.S.4.6%
๐Ÿ‡ง๐Ÿ‡ญ Bahrain4.4%
๐Ÿ‡ท๐Ÿ‡บ Russia4.3%
๐Ÿ‡ง๐Ÿ‡พ Belarus4.3%
๐Ÿ‡ธ๐Ÿ‡ฎ Slovenia4.3%
๐Ÿ‡ฒ๐Ÿ‡พ Malaysia4.3%
๐Ÿ‡จ๐Ÿ‡ณ China4.1%
๐Ÿ‡ฎ๐Ÿ‡ธ Iceland4.0%
๐Ÿ‡ง๐Ÿ‡ด Bolivia4.0%
๐Ÿ‡ญ๐Ÿ‡ฐ Hong Kong SAR4.0%
๐Ÿ‡ณ๐Ÿ‡ฑ Netherlands3.9%
๐Ÿ‡ณ๐Ÿ‡ฟ New Zealand3.9%
๐Ÿ‡ญ๐Ÿ‡บ Hungary3.8%
๐Ÿ‡ณ๐Ÿ‡ด Norway3.8%
๐Ÿ‡ฎ๐Ÿ‡ฑ Israel3.8%
๐Ÿ‡ช๐Ÿ‡จ Ecuador3.8%
๐Ÿ‡ฆ๐Ÿ‡บ Australia3.7%
๐Ÿ‡ฒ๐Ÿ‡ฝ Mexico3.7%
๐Ÿ‡น๐Ÿ‡ผ Taiwan 3.6%
๐Ÿ‡ฒ๐Ÿ‡ฉ Moldova3.5%
๐Ÿ‡ฐ๐Ÿ‡ท South Korea3.4%
๐Ÿ‡ฉ๐Ÿ‡ช Germany3.4%
๐Ÿ‡ฒ๐Ÿ‡น Malta3.3%
๐Ÿ‡ต๐Ÿ‡ฑ Poland3.2%
๐Ÿ‡ธ๐Ÿ‡จ Seychelles3.0%
๐Ÿ‡ฒ๐Ÿ‡ด Macao SAR2.7%
๐Ÿ‡ฏ๐Ÿ‡ต Japan2.4%
๐Ÿ‡จ๐Ÿ‡ญ Switzerland2.4%
๐Ÿ‡ป๐Ÿ‡ณ Vietnam2.3%
๐Ÿ‡จ๐Ÿ‡ฟ Czech Republic2.3%
๐Ÿ‡ธ๐Ÿ‡ฌ Singapore2.1%
๐Ÿ‡น๐Ÿ‡ญ Thailand 1.0%

In Europe, Bosnia and Herzegovina is estimated to see the highest unemployment rate, at over 17%. It is followed by North Macedonia (15.0%) and Spain (12.7%). These jobless rates are more than double the projections for advanced economies in Europe.

The U.S. is forecast to see an unemployment rate of 4.6%, or 1.2% higher than current levels.

This suggests that todayโ€™s labor market strength will ease as U.S. economic indicators weaken. One marker is the Conference Boardโ€™s Leading Economic Index, which fell for its tenth straight month in December. Lower manufacturing orders, declining consumer expectations, and shorter work weeks are among the indicators it tracks.

Like the U.S., many advanced countries are witnessing labor market strength, especially in the United Kingdom, Asia, and Europe, although how long it will last is unknown.

A Closer Look at U.S. Numbers

Unlike some declining economic indicators mentioned above, the job market is one of the strongest areas of the global economy. Even as the tech sector reports mass layoffs, unemployment claims in the U.S. fall below recent averages. (Itโ€™s worth noting the tech sector makes up just 4% of the workforce).

In 2022, 4.8 million jobs were added, more than double the average seen between 2015-2019. Of course, the pandemic recovery has impacted these figures.

Some analysts suggest that despite a bleaker economic outlook, companies are hesitant to conduct layoffs. At the same time, the labor market is absorbing workers who have lost employment.

Consider the manufacturing sector. Even as the January ISM Purchasing Managers Index posted lower readings, hitting 47.4โ€”a level of 48.7 and below generally indicates a recessionโ€”factories are not laying off many workers. Instead, manufacturers are saying they are confident conditions will improve in the second half of the year.

Containing Aftershocks

Today, strong labor markets pose a key challenge for central bankers globally.

This is because the robust job market is contributing to high inflation numbers. Yet despite recent rate increases, the impact has yet to prompt major waves in unemployment. Typically, monetary policy moves like these takes about a year to take peak effect. To combat inflation, monetary policy has been shown to take over three or even four years.

The good news is that inflation can potentially be tamed by other means. Fixing supply-side dynamics, such as preventing supply shortages and improving transportation systems and infrastructure could cool inflation.

As investors closely watch economic data, rising unemployment could come on the heels of higher interest rates, but so far this has yet to unravel.

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Visualizing 90 Years of Stock and Bond Portfolio Performance

How have investment returns for different portfolio allocations of stocks and bonds compared over the last 90 years?

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Investment Returns by Asset Allocation

Visualizing 90 Years of Stock and Bond Portfolio Performance

Last year, stock and bond returns tumbled after the Federal Reserve hiked interest rates at the fastest speed in 40 years. It was the first time in decades that both asset classes posted negative annual investment returns in tandem.

Over four decades, this has happened 2.4% of the time across any 12-month rolling period.

To look at how various stock and bond asset allocations have performed over historyโ€”and their broader correlationsโ€”the above graphic charts their best, worst, and average returns, using data from Vanguard.

How Has Asset Allocation Impacted Returns?

Based on data between 1926 and 2019, the table below looks at the spectrum of market returns of different asset allocations:

Stock / Bond
Portfolio Allocation
Best Annual ReturnWorst Annual ReturnAverage Annual Return
0% / 100% 32.6%-8.1%5.3%
10% / 90% 31.2%-8.2%6.0%
20% / 80% 29.8%-10.1%6.6%
30% / 70% 28.4%-14.2%7.2%
40% / 60% 27.9%-18.4%7.8%
50% / 50%32.3%-22.5%8.3%
60% / 40% 36.7%-26.6%8.8%
70% / 30% 41.1%-30.7%9.2%
80% / 20% 45.4%-34.9%9.6%
90% / 10% 49.8%-39.0%10.0%
100% / 0% 54.2%-43.1%10.3%

We can see that a portfolio made entirely of stocks returned 10.3% on average, the highest across all asset allocations. Of course, this came with wider return variance, hitting an annual low of -43% and a high of 54%.

A traditional 60/40 portfolioโ€”which has lost its luster in recent years as low interest rates have led to lower bond returnsโ€”saw an average historical return of 8.8%. As interest rates have climbed in recent years, this may widen its appeal once again as bond returns may rise.

Meanwhile, a 100% bond portfolio averaged 5.3% in annual returns over the period. Bonds typically serve as a hedge against portfolio losses thanks to their typically negative historical correlation to stocks.

A Closer Look at Historical Correlations

To understand how 2022 was an outlier in terms of asset correlations we can look at the graphic below:

The last time stocks and bonds moved together in a negative direction was in 1969. At the time, inflation was accelerating and the Fed was hiking interest rates to cool rising costs. In fact, historically, when inflation surges, stocks and bonds have often moved in similar directions.

Underscoring this divergence is real interest rate volatility. When real interest rates are a driving force in the market, as we have seen in the last year, it hurts both stock and bond returns. This is because higher interest rates can reduce the future cash flows of these investments.

Adding another layer is the level of risk appetite among investors. When the economic outlook is uncertain and interest rate volatility is high, investors are more likely to take risk off their portfolios and demand higher returns for taking on higher risk. This can push down equity and bond prices.

On the other hand, if the economic outlook is positive, investors may be willing to take on more risk, in turn potentially boosting equity prices.

Current Investment Returns in Context

Today, financial markets are seeing sharp swings as the ripple effects of higher interest rates are sinking in.

For investors, historical data provides insight on long-term asset allocation trends. Over the last century, cycles of high interest rates have come and gone. Both equity and bond investment returns have been resilient for investors who stay the course.

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Visualized: The State of the U.S. Labor Market

The U.S. labor market is remarkably strong, with a 3.4% unemployment rate. Which sectors are seeing the highest job gains in 2023?

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Visualized: The State of the U.S. Labor Market

The last time the U.S. labor market was this strong was in 1969.

Unemployment fell to 3.3%, incomes were soaring to historic levels, and inflation was rising at a fast clip. Like today, the Federal Reserve was tightening monetary policy to stifle inflation. Yet much of the wage increases were washed out by rising consumer prices.

The above graphic looks at the industries driving todayโ€™s robust job market using data from the Bureau of Labor Statistics. Later, we look into the impact on inflation, and whether todayโ€™s market can be sustained.

What is Driving the U.S. Labor Market?

Broadly, service-led industries witnessed the highest share of job growth in January.

Still, as the table below shows, a key part of the services sectorโ€”leisure and hospitality employmentโ€”remains under pre-pandemic levels. A similar trend is seen in retail services.

Rank
IndustryJob Growth
Jan 2023
Job Growth
Since 2020
1Leisure and Hospitality128K-495K
2Education and Health
Services
105K361K
3Professional and Business
Services
82K1,475K
4Government74K-482K
5Retail Services30K-37K
6Construction25K276K
7Transportation and
Warehousing
23K955K
8Manufacturing19K214K
9Other Services18K-121K
10Wholesale Trade11K148K
11Financial Activities6K245K
12Mining and Logging2K-55K
13Utilities-1K8K
14Information-5K211K

Adding 1.5 million jobs since 2020 is professional and business services, the highest overall. This sector covers legal, accounting, veterinary, engineering and other specialized services.

We are also seeing strong gains in transportation and warehousing. Last year, the sector added an average of 23,000 jobs, totaling almost 955,000 over the course of the pandemic. Today, trucking jobs exceed 2019 levels and warehouse employment is roughly 50% higher.

Although manufacturing hasn’t seen the highest gains, the sector has one of the lowest unemployment rates across job sectors, at 2.4%. Yet the industry faces an acute labor shortageโ€”if every skilled unemployed worker were to fill open job vacancies, a third of jobs in durable manufacturing would remain open.

Cooling Wage Growth

Despite rock-bottom unemployment numbers, wage growth is slowing. In January, it fell to 4.4% annually, down from a multi-decade high of 5.9% in March last year.

At the same time, wage growth falls below inflation by about 1%.

U.S. Wages and Inflation

Wage growth is carefully watched by the Federal Reserve. Typically, their annual wage growth target is 3.5% to be compatible with 2% inflation.

In the current environment, this wage growth trend serves as a double-edged sword. As wage growth slows, workers are less likely to see wages keep up with inflation. On the other hand, slower wage growth could help prevent inflation from rising in the first placeโ€”and interest rates from climbing higher.

Where is the Job Market Heading?

The question on everyone’s minds is whether today’s job market will stay resilient.

According to Fitch Ratings, slowing aggregate demand in response to higher interest rates will begin to weigh on the U.S. labor market, and the 517,000 new jobs created in Januaryโ€”three times the level expected by analystsโ€” won’t last long.

Eventually, both higher borrowing costs and elevated compensation costs could weigh on corporate profits. On the other hand, the pandemic has changed the labor market. Relief legislation may continue to buoy the job market and workers may also remain scarce as people retire or leave for other reasons.

Given how unemployment serves as a lagging indicator, the material effects in the economy will likely appear before cracks begin to show in the U.S. labor market.

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