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Assessing job losses due to the Coronavirus Pandemic (COVID-19) and the minimum required economic growth for job creation in the Arab labour market

Abstract : We apply the Okun’s Law linking the unemployment rate to GDP growth to assess the loss in terms of jobs following Covid-19 recession. Estimations were conducted on a benchmark of nine Arab countries, namely, Algeria, Egypt, Jordan, Lebanon, Morocco, Mauritania, Palestine, Sudan, and Tunisia. We adopt different economic outlook scenarios for the GDP forecasts, which all tend to have a consensus for the 2020 forecasts. The overall results show that the 2020 recession will lead to an increase in the unemployment rate by around 2 percent for the studied sample and 2.5 percent for the Arab region. However, the study revealed asymmetric effects which emphasize the increase in unemployment rate in times of economic recessions. Therefore, unemployment rate in 2020 is likely to increase from its level of 2019 by 3.6 to 3.8 percentage points in the studied sample and by 4.2 to 5 percentage points for the Arab world. This results in about 2.8 to 3 million job losses in the sample and about 6 to 7 million in the Arab world. Furthermore, the paper estimates the minimum required economic growth as a threshold above which a country can create new jobs. For the studied sample, this threshold is estimated to around 3.9 for the panel of nine studied countries. According to IMF regional economic outlook update released in July 2020, the Arab world GDP growth is expecting to recover in 2021 by 3.5 percent. This number is below the estimated minimum growth threshold of 3.9 percent, necessary for new jobs creation that allows reducing unemployment rate from its previous level. This means that the 2021 GDP recovery will not be enough for the employment sector recovery, which may even see further accumulated increase in the unemployment rate. By individual level, this threshold varies across countries, from low values of 2.6 percent in Algeria, 3 percent in Lebanon to high levels of 5.7 percent in Palestine and 6.9 percent in Sudan. Over the recent past decades, the minimum required economic growth for jobs creation compared to the average actual economic growth, explains the fact that some countries succeeded to some extent in reducing unemployment rates while others still have major challenges in this issue.
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Preprints, Working Papers, ...
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https://halshs.archives-ouvertes.fr/halshs-03007781
Contributor : Catherine Ciesla <>
Submitted on : Monday, November 16, 2020 - 3:08:44 PM
Last modification on : Tuesday, November 24, 2020 - 4:00:19 PM

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  • HAL Id : halshs-03007781, version 1

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CREG | UGA

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El Mostafa Bentour. Assessing job losses due to the Coronavirus Pandemic (COVID-19) and the minimum required economic growth for job creation in the Arab labour market. 2020. ⟨halshs-03007781⟩

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