Debt stops job rally, says OECD

LONDON: The spectre of a global "jobless recovery" was conjured up yesterday by the Organisation for Economic Co-operation and Development , which predicted "the economic recovery now spreading across OECD countries is still too timid to halt the continuing rise in unemployment".

The warning came as the latest evidence on the supply of credit to the British economy showed little sign of radical improvements. The Bank of England's Trends In Lending report confirmed British consumers were still paying off their credit card and other consumer debts and lending to businesses fell across all the main sectors of the economy in the third quarter.

The OECD's latest economic outlook also says Britain's public finances are weak and require "concrete" plans to bring the deficit under control.

The developed world's overhang of debt, it says, is the major factor holding back a more vigorous recovery and the creation of new jobs. Pressure on public finances will also dampen public-sector employment growth.

The OECD expects the jobless rate to peak in the first half of 2010 in the United States, but it may not be until 2011 that unemployment begins to fall in the eurozone area.

The report says the recovery is tepid because economic activity is being held back by families and businesses repairing their finances and reducing their debts.

China, it predicts, will lead the global recovery, helped by its limited direct exposure to the financial crisis and a massive stimulus package.

- INDEPENDENT