Tech-enabled productivity may mean a job-lite expansion in Asia Pacific
In the long run, the drag on employment growth will move from weak labour demand to a fast-shrinking labour supply.
The US is undergoing or heading towards a ‘jobless expansion’. Asian economies, likewise, will probably experience slow job growth over the next few years, accompanied by mechanically rising productivity gains. In the near term, the drag on the job market is likely to come from cyclically weak demand for labour. But further down the line, it is the shrinking labour supply that will weigh more heavily on employment growth.
In some countries, youth unemployment is already high (notably China), suggesting hiring appetite is weak. And two near-term cyclical forces are likely to continue to weigh on demand for labour across the region: the effects of US tariffs could further dampen hiring next year; and automation and tech advances could displace roles and dent labour demand growth.
Since firms might limit hiring, economic growth will need to come from productivity gains. But we don’t expect productivity to be a major short-term driver of activity. Productivity gains are likely to be partly mechanical – more from adding capital, rather than making big improvements to efficiency. And productivity might remain depressed if jobs stay within low-output agricultural work or low-efficiency informal employment.
Even export-oriented economies that have seen solid growth and job expansions over the past decade are at risk of rapidly slowing employment growth. A tougher trade environment blunts the effectiveness of the low-cost export model, and a shortage of higher-quality jobs risks wage stagnation, especially in economies that currently rely on low-productivity, low-wage jobs.
In the long run, the drag on employment growth will move from weak labour demand to a fast-shrinking labour supply.
