IMF predicts high unemployment to persist

Unemployment in industrialized countries will likely remain high this year and next, and central banks should keep interest rates low, the International Monetary Fund said Wednesday.

It also said governments should be prepared to spend on job creation.

The IMF's findings were based on its analysis of unemployment trends in 21 of the world's richest countries during recessions and recoveries over the past 30 years.

Given the sluggish economic recovery and the lingering effects of the global financial crisis, it predicted average unemployment in the 14 most advanced economies, including Canada, will be around nine per cent at the end of 2011.

Canada's unemployment rate for March was 8.2 per cent.

Patricia Croft, chief economist with RBC Global Asset Management, told CBC News that "in this case, Canada may be an exception to the rule" among industrialized countries, "since this country has recovered half the jobs lost during the downturn, whereas in the U.S., there are still 8.5 million people that areunemployed."

But Croft said the unanswered question is, "How many jobs lost during this recession are permanent job losses and that's going to be an issue that we have to wrestle with over the course of the next year or so."

"One legacy of the Great Recession will likely be persistently high unemployment rates in several advanced economies," the IMF report said. "Because high unemployment can quickly become a structural problem, this could lead to serious political and social challenges."

"The global economy is recovering from its deepest downturn since World War II, but the speed of recovery differs greatly across regions," the study said.

"For many advanced economies where the financial crisis was centred recovery is expected to be slow. In this context, persisting high unemployment may be the key policy challenge facing these economies as recovery gains traction."