Over centuries, technological, social and political transformations have shaped economies and the capacity of individuals to make a living. The first and second Industrial Revolutions displaced trades that had thrived on older technologies and gave rise to new machines, new ways of work and new demand for skill sets that could harness the power of steam, coal and factory production. The transformation of production has consequently given rise to new professions, and new ways of working that eventually paved the path to greater prosperity despite initial job displacement among individuals. Although in 2018 we proposed that the labour market impact of the Fourth Industrial Revolution can be managed while maintaining stable levels of employment, the current 2020 global recession has created a ‘new normal’ in which short-term and long-term disruptions are intertwined.

A significant volume of research has been published on the future of work since the World Economic Forum published it first edition. To date, the conclusions drawn from that body of literature appear to offer both hope and caution. The twin forces of technology and globalisation have brought profound transformations to labour markets and in the near term.² Few analysts propose that technological disruption will lead to shrinking opportunities in the aggregate,³ and many of the insights gathered point to the emergence of new job opportunities. Across countries and supply chains, research has evidenced rising demand for employment in nonroutine analytics jobs accompanied by significant automation of routine manual jobs.⁴ Empirically, these changes can be observed in data tracking employment trends in the United States between 2007–2018. The evidence indicates that nearly 2.6 million jobs were displaced over a span of a decade.⁵ Figure 1 presents the types of roles that are being displaced—namely Computer Operators, Administrative Assistants, Filing Clerks, Data Entry Keyers, Payroll Clerks and other such roles which depend on technologies and work processes which are fast becoming obsolete.

In late 2019, the gradual onset of the future of work—due in large part to automation, technology and globalization—appeared to pose the greatest risk to labour market stability. The first half of 2020 has seen an additional, significant and unexpected disruption to labour markets, with immediate knock-on effects on the livelihoods of individuals and the household incomes of families. The COVID-19 pandemic appears to be deepening existing inequalities across labour markets, to have reversed the gain in employment made since the Global Financial Crisis in 2007–2008, and to have accelerated the arrival of the future of work. The changes heralded by the COVID19 pandemic have compounded the long-term changes already triggered by the Fourth Industrial Revolution, which has, consequently, increased in velocity and depth.

In reaction to the risk to life caused by the spread of the COVID-19 virus, governments have legislated full or partial closures of business operations, causing a sharp shock to economies, societies and labour markets. Many businesses have closed their physical office locations and have faced limitations in doing business face-to-face. Figure 2 shows the trajectory of those closures. Beginning in mid-March and by mid-April, nearly 55% of economies (about 100 countries) had enacted workplace closures which affected all but essential businesses.⁶ During May and June, economies resumed some in-person business operations—yet limitations to the physical operation of business continue, geographic mobility between countries persist and the consumption patterns of individuals have been dramatically altered. By late June 2020, about 5% of countries globally still mandated a full closure of in-person business operations, and only about 23% of countries were fully back to open.⁷ In addition, irrespective of legislated measures, individuals have shifted to working remotely and enacting physical distancing.⁸

Collectively, the life-preserving measures to stop the spread of the COVID-19 virus have led to a sharp contraction of economic activity, a marked decline in capital expenditure among several industries facing decline in demand for their products and services, and put new pressures on enterprises and sectors. Not all companies have been equally affected. Some businesses have the resources to weather the uncertainty, but others do not. Among those faltering are companies that typically don’t hold large cash reserves such as SMEs (small-to-medium enterprises) or businesses in sectors such as Restaurants and Hospitality. Some types of business operations can be resumed remotely, but others, such as those in the Tourism or Retail sectors that depend on in-person contact or travel, have sustained greater damage (Figure 9 on page 17 demonstrates some of those effects).

The current health pandemic has led to an immediate and sudden spike in unemployment across several key economies—displacing workers from their current roles. Since the end of the Global Financial Crisis in 2007–2008, economies across the globe had witnessed a steady decrease of unemployment. Figure 3 presents the historical time series of unemployment across a selection of countries and regions. Annotated across the figure are the four global recessions which have throughout history impacted employment levels in significant ways. The figure shows that during periods of relative labour market stability unemployment stands at near or around 5% while during periods of major disruption unemployment peaks at or exceeds 10%. During the financial crisis of 2010, unemployment peaked at 8.5% only to drop to an average of 5% across OECD economies in late 2019.⁹ According to the International Labour Organization (ILO), during the first half of 2020 real unemployment figures jumped to an average of 6.6% in quarter 2 of 2020. The OECD predicts that those figures could peak at 12.6% by the end of 2020 and still could stand at 8.9% by end 2021.¹⁰ This scenarios assumes that the economies analysed experience two waves of infection from the COVID-19 virus accompanied by an associated slow-down of economic activity. It remains unclear whether current unemployment figures have peaked or whether job losses will deepen over time. New analysis conducted by the IMF has estimated that 97.3 million individuals, or roughly 15% of the workforce in the 35 countries included in the analysis, are classified as being at high risk of being furloughed or made redundant in the current context.¹¹

Countries have taken different approaches to tackling the pandemic, in the established provision of social protection to displaced workers and in newly enacted temporary government schemes targeted at job retention. This has created varied trajectories of labour market disruption and recovery. For instance, several economies, such as Germany and Italy, have established large-scale temporary job retention schemes including wage support measures (commonly called furlough schemes). According to the latest estimates such schemes have in recent months subsidized the wages of close to 60 million workers.¹² While initially more temporary in nature, the persistence of limits to economic activity caused by COVID-19 has led to an extension of several job retention schemes up to the end of 2021 in an effort to prevent sudden spikes in unemployment.¹³ While such measures have meant that unemployment figures in those economies have stayed relatively stable, it is yet to be seen if these trends hold after they are lifted.

Comparing figures for quarter 2 of 2020 to the same quarter in 2019, unemployment in Australia increased by 1.5 percentage points; in Brazil that same figure was 1.6; in Canada, 6; in Chile, 5.5; Columbia, 9; and United States, 8.5. The relevant statistics for countries such as the United Kingdom, Germany, Japan, France and Italy show greater resilience. The country profiles in Part 2 of this report present key labour market indicators showcasing the latest annual, monthly and quarterly figures for the economies covered in this report, including the figures listed above. It is evident that the United States and Canada experienced a significant disruption on an unprecedented scale. Employment figures for the United States illustrated in Figure 4 show that the unemployment rate rose from 3.5% in February 2020 to peak at 14.7% in April 2020. The unemployment rate for the United States has now dropped to stand closer to 10%. In contrast, during the Global Financial Crisis in 2009 the unemployment rate in the United States rose from 4.7% in December 2007 to nearly 10% by June 2009.¹⁴ In two months the COVID-19 pandemic has destroyed more jobs than the Great Recession did in two years. As the United States has lifted restrictions on the physical movement of people, some workers have been recalled into employment while others have seen temporary redundancies become permanent job displacement (some of this data can be observed in Figure 11 on page 9).

It appears increasingly likely that changes to business practice brought about by this pandemic are likely to further entrench wholly new ways of working, and that the second half of 2020 will not see a return ‘back to normal’ but will instead see a return to ‘the new normal’.

Early evidence from the World Economic Forum’s Future of Jobs Survey presented in Figure 5 suggests that, in addition to the labour market displacement caused by this health shock, employers are set to accelerate their job automation and augmentation agenda, raising the possibility of a jobless recovery. Among the business leaders surveyed, just over 80% report that they are accelerating the automation of their work processes and expanding their use of remote work. A significant 50% also indicate that they are set to accelerate the automation of jobs in their companies. In addition, more than one-quarter of employers expect to temporarily reduce their workforce, and one in five expect to permanently do so. The International Labour Organization (ILO) projects that by the second quarter of 2020, the equivalent of 195 million workers will have been displaced and as jobs are transformed at a greater speed.¹⁵

Notes: Forecasts for Q3 2020 produced by the OECD assuming two waves of COVID-19, namely a "double hit" scenario. EA17 = Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Malta, Netherlands, Austria, Portugal, Slovenia, Slovakia, and Finland.

Note: Unemployment Rate, also defined as the U-3 measure of labour underutilization, retrieved from FRED, Federal Reserve Bank of St. Louis.

While many workers moved into unemployment during the period of mid-March to the end of July, hiring rates also remained low, reflecting business reluctance to invest in new personnel. This means that workers displaced from the labour market have fewer opportunities to return to work as businesses reduce their workforce. This trend can be observed through data from the professionals on the LinkedIn platform, which allows the LinkedIn Economic Graph team to track changes in hiring rates for seven key economies—Australia, China, France, Italy, Singapore, the United Kingdom and the United States. Those hiring rates are featured in Figure 6. They show that in China, for instance, hiring contracted to a low of -47% year-on-year rate at the end of February. In France and Italy, the contraction was more pronounced, reaching -70% and -64.5%, respectively, in mid-April. Those low figures were approached by the United Kingdom and Australia, where contractions reached a relatively more robust -40%. Since then, hiring rates have gradually rebounded, with most of the seven key economies tracked by these metrics trending towards a 0% year-on-year change. By 1 July, China, France and the United States had seen the most recovery in comparative hiring rates, at -6% or -7%. By the end of September the countries with the strongest recovery in hiring were China (22%), Brazil (13%), Singapore (8%) and France (5%). In those economies it appears that hiring is now compensating for the months in which new personnel were not engaged, indicating some stabilization of the labour market.

This tentative rebound is not equally distributed across industries. Figure 7 shows the year-on-year change in hiring rates throughout May, June, July, August, and most of September for seven key industries and the eight economies tracked by LinkedIn. Among the notable findings are those indicating a persistent hiring slump in Recreation and Travel, Consumer Goods, and Manufacturing. Also striking is that the Software and IT sector, which is not shedding jobs at the same rate as other industries, is also not hiring at the same rate as this time last year. The same observation also holds for the Finance Industry. It is perhaps not surprising that the Health and Healthcare industry has maintained the closest to comparable hiring rates to this time last year.

In sum, unemployment and hiring rates suggest a significant number of individuals were displaced across labour markets over the month of April 2020. While those figures have stopped trending in a negative direction in the period up to July 2020, this recovery remains tentative, with unequal geographic and industry patterns. Longer persistence of these trends is likely to entrench labour market scarring, lead to an overall reduction in employment and entrench worker displacement.