- [Reporter] COVID-19 has caused a surge
in global unemployment like we've never seen before.
But in the U.S. jobs have disappeared faster
than in any other developed country.
And then in May America's unemployment rate began to rebound
while in other developed nations,
it remained relatively stable.
- The U.S. also creates a ton of jobs
because it's easier to fire people.
Businesses are more confident to hire people.
So you'd expect that the flexible labor markets
to move more, I suppose, in response to changes in demand.
- [Reporter] In May and June,
the U.S. added about 7.5 million jobs
but the unemployment rate is still at the highest level
since the depression.
As the pandemic has put us in uncharted territory,
we wanted to know, will American jobs
bounce back faster than the rest of the world?
First, it's important to understand
what difference a flexible labor market can make.
- In Europe, there's more of a sense that
the company has to have a very strong reason
to be able to fire someone, whereas in the U.S.
I think it's much more of a normal part of a business.
- [Reporter] A flexible labor market has its pros and cons
and proponents say in normal times,
it helps keep unemployment low
by making it easy for people to move between jobs.
Just look at the difference
in how long people stay at their jobs
in the U.S. versus Germany.
- It's a different mentality that in Germany,
it's not a job for life,
but the average employment tenure is 10 years
at a single company, compared with 4.2, I think it is,
in the U S.
- [Reporter] After the 2008 financial crisis,
the U S unemployment rate recovered faster than Europe's,
which also went through a debt crisis.
So, it makes sense that a more flexible labor market
would see a bigger jump in unemployment during a recession,
since it's easier for companies to lay off employees
when demand falls.
But if you look at what happened
at the start of the pandemic,
you'll see two very different outcomes
for two job markets economist deemed flexible.
The U.S. saw unemployment rise,
roughly 11 percentage points from January to April
while Japan's unemployment rate
grew half a percentage point.
That's where different pandemic strategies come in.
In short, the U.S. chose to give money directly to workers
while the economy reboots,
while others like Japan and Europe
opted to subsidize companies and protect jobs.
- Canada and the U.S. I think have been among the ones
that have seen the biggest jump.
The main reason I suppose, is because
they've tried to protect workers rather than jobs.
They haven't gone for these job furlough schemes
on a grand scale as the Europeans have.
- [Reporter] As part of its first stimulus package,
lawmakers sent Americans a $1,200 one time stimulus cheque
and added $600 a week to unemployment benefits,
effectively accepting a wave of job losses.
They also funded key industries like aviation
to try and prevent or delay some layoffs.
Meanwhile, Japan's government allocated nearly $700 billion
to business financing
and enacted a program
to subsidize up to around $140 a day in wages
for furloughed employees.
The EU has invested roughly $120 billion
in similar short term work schemes.
Since those employees are still on the books,
even if they're not working,
they're not counted as unemployed.
That works well for those lucky enough
to have a permanent job,
but it comes at the cost of very high unemployment
for young people in some countries
or those on temporary contracts.
- I speak to people on furlough
and yeah, it's essentially a holiday.
Obviously there's nervousness
that is concerned about the pandemic,
but people are spending their time doing sports
or meeting the friends.
It's a very different experience
being without work in Europe at the moment than in the U.S.
- [Reporter] But the question is, how long can it last?
- The labor cost is only part of what companies are paying.
But you still have to pay for the premises,
and there's other fees that you have to pay,
and you've got no income.
So at some point you'll still have to pull the plug
and let those employees go.
- [Reporter] That breaking point
is going to depend on how fast economies can recover.
The longer the pandemic drags on,
the more companies could go bust,
erasing jobs that likely won't be immediately replaced.
In June, the IMF projected the global economy
to grow 5.4% next year,
but said recovery is still uncertain.
- In the next two or three years,
we'll see which response was better,
but traditionally the U.S. labor market
has been much more dynamic
in kind of reallocating to growth industries.
- [Reporter] Just look at how the us stock market
has outperformed Japan and Europe.
Some big American companies have done really well
throughout the pandemic.
And there are high hopes
that the companies that have done well
will decide to create jobs
while Europe and Japan
have kept unemployment rates relatively stable so far,
they risked supporting jobs that might not be as valuable
by the time the pandemic ends.
Think aviation or German auto workers
producing parts for engines that will likely be phased out.
- Would you wanna have exactly the same jobs in place
two years down the line? Probably not.
- [Reporter] Germany recently allocated $12 billion
to expand its job support program until the end of 2021.
But the future of us business support is still unclear
as lawmakers have to regularly
assess and approve stimulus packages.
- There's just so much uncertainty
about how long this is gonna last.
The next big debate is gonna be about the exit strategy
and how to phase out some of these programs.
- [Reporter] Even if the U.S. unemployment rate
keeps falling,
the CBO predicts it'll take more than a decade
to reach pre pandemic levels.
While other developed countries
haven't made such longterm projections yet,
the ECB forecast that unemployment in the Eurozone
will still be above pre pandemic levels in 2022.
A full economic recovery from this pandemic
is going to take years.
And by the time it's all over,
we may be looking at very different labor markets
around the world.