The jobs market may have been slow in recent years, as the industry has run up against some major stumbling-blocks, but recovery is on the way. Economist Bryan Finn, who spoke yesterday at Farnborough, outlines why.
The world economy is currently growing at around 5% per annum, up from an average growth of just under 4% in 2003 as a whole. The world's largest economy, the United States, grew by 5% in the first quarter of this year and is believed to have grown at an annual rate of around 4.8% in the second quarter of 2004.
The Asian economies are all also enjoying rapid growth in the first half of 2004 and the Americas as a whole are enjoying a bout of economic prosperity.
The only region not to enjoy the upturn in the world economy is the heartland of continental Europe.
The Eurozone economies grew by a lacklustre 1.3% in the first quarter of 2004, and by just over 1.5% in the second quarter of this year. Italy, the Netherlands and Austria all recorded growth of only 0.8% in the first quarter; Germany and France did somewhat better, growing by 1.5% and 1.7% respectively. The UK and Spain fared much better growing by just under 3% in the first half of 2004.
The revival in growth has had a marked impact on the recruitment market. Over the last three years, recruitment markets across the world have suffered as the world economy continued to under-perform.
We estimate that in the UK alone, nearly two million jobs were lost between 2001-3 through technological advances and changes in working practices, and a further 250,000 jobs were lost through outsourcing to countries with low labour costs. The economy needs to grow by at least 2-2.5% per annum just to compensate for these underlying trends. Fortunately we expect growth in the UK of nearly 3% per annum in 2004 and 2005, and therefore recruitment markets should grow quite significantly in the UK over the next 12-18 months.
This trend should be evident throughout most of the world economy. In the United States, the sharp recovery in the economy evident since last summer took some while to feed through to the jobs market, but there is now strong evidence to suggest that it finally has.
Unemployment in the United States peaked at 6.3% in June last year but by spring 2004 it had fallen to 5.6%. This is in contrast to much of Europe, where unemployment continues at high levels.
The upswing in the world economy is also having a profound impact on the aerospace industry. The Iraqi war, SARS and the general climate of global uncertainty have conspired to make 2003 another difficult year for world aviation.
But the market is recovering fast: international revenue passenger kilometres (RPK) look set to rise by 15% in 2004, following a 2.4% fall in 2003. Furthermore, 2005 and 2006 are also looking to be strong growth years with further growth of around 7% per annum. Thereafter, we expect growth to settle down at around 4-5% per annum.
There are of course significant risks to the global recovery that may yet conspire to deny a recovery in the recruitment markets. Most prominent in recent weeks has been the price of oil which in May 2004 burst through the $40 barrier for the first time since the autumn of 2000, raising the spectre of yet another oil-induced global recession.
On balance, these fears are somewhat overblown; the world economy is no longer as dependent on oil as it once was, and oil prices are still low in real terms compared with the 1970s and 1980s.
Of more concern, perhaps, is the huge budget deficit in the United States which is projected to account for around 5% of GDP in 2004, and then dramatically worsen in 2005 and beyond. Funding this level of debt is likely is lead to higher interest rates from 2005 onwards.
Source: Flight Daily News