The Global Impact of Worldwide Unemployment Rates

When the U.S. economy entered into a recession in December 2007, not only did unemployment rates in the United States continuously begin to rise, but this was also the case worldwide.  The objective of this paper is to look at the rising unemployment rates since 2007 of the G8 countries: France, the United States, the United Kingdom, Italy, Canada, Germany, Russia, and Japan.  By looking at both quarterly and annual data, it is shown that the elevation in unemployment rates worldwide has caused a negative GDP growth rate for all of the G8 countries.  In this paper, the G8 countries are shown to be suffering from either a growing current account deficit or a shrinking current account surplus, which is having a major negative impact on the world’s economic future.  Not only is it causing the world to have negative productivity rates but also a loss in demand has hurt export dependent countries.  Five developing countries, known as the Plus Five: Brazil, China, India, Mexico and South Africa, unlike G8 countries, have expanded demand which as a result has cut down on government stimulus. The global recession has helped developing countries and the IMF learn from this past recession and that is why these developing countries will be the new leaders when it comes to growth while the G8 countries will be behind.  Government intervention and help from central banks both intend to assist the global economy to recover from the recession but now the global economy is in need of walking without crutches.  In the short-run, many hoped that the U.S., European and Japanese economies would do well because of the rise in consumer demand, exports and investment, due to the rise in government spending and expansionary fiscal and monetary policies.  The long-run, however, is far more important and by analyzing different monetary and fiscal policies for these countries the results will show what we can expect for the future of these G8+5 economies. 

* Data was collected from the European Commission, Bureau of Labor Statistics, the Deutsche Bundesbank, STCA - Statistics of Canada, Federal Service of State Statistics of Russia, and the Ministry of International Affairs of Japan.