Global Unemployment on the Rise Across 6 Wealthy Countries as Central Banks Respond with Rate Cuts

Over the past six months, unemployment rates have been on the rise across several advanced economies, including the United States, the United Kingdom, Canada, Germany, Australia, and Switzerland, according to Fitch Ratings’ latest ’20/20 Vision’ report. Although unemployment remains low by historical standards, the easing of labor market conditions is beginning to alleviate some of the pressure on wage inflation. This trend is providing central banks in these economies with justification to implement interest rate cuts, a trend that is now accelerating.

In the United States, the unemployment rate climbed to 4.3% in July 2024, up from 3.5% the previous year. Similarly, in the United Kingdom, the rate increased to 4.2% in May 2024, compared to 3.8% in November 2023.

Canada experienced a significant rise, with the unemployment rate reaching 6.4% in July 2024, up from 5% in January of the same year. Germany saw a more modest increase, with the rate at 3.4% in June 2024, compared to 2.9% in May of the previous year.

Australia also faced rising unemployment, with the rate jumping to 4.2% in July 2024 from 3.5% in June 2023. In Switzerland, the unemployment rate edged up to 2.5% in July 2024, compared to 2% in June 2023.

In response to these shifts, central banks in advanced economies have begun cutting interest rates. The European Central Bank, the Bank of England, the Swiss National Bank, and the Bank of Canada have all lowered rates in the past few months. Meanwhile, U.S. 10-year bond yields have declined as markets anticipate upcoming rate cuts from the Federal Reserve.

Globally, other central banks have taken similar actions. The People’s Bank of China reduced its one-year medium-term lending facility rate by 20 basis points to 2.3% in July 2024, leading to a drop in China’s 10-year government bond yields. Banco de Mexico also cut its policy rates recently.

In contrast, some central banks are taking a different approach. The Bank of Japan raised its uncollateralized overnight call rate to around 0.25%, up from the previous range of 0%-0.1%. Meanwhile, the Central Bank of Russia significantly increased its policy rate by 200 basis points to 18%, in response to accelerating inflation, which reached 9.1% in July.

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