By Brian Love
PARIS, Sept 16 (Reuters) - Fiscal stimulus programmes could save up to 5.5 million jobs in OECD countries next year but governments must stay focussed on reversing a recession-driven surge to record unemployment, the author of an OECD jobs report says.
Despite signs of recovery, anything up to 25 million people are likely to lose their job between end-2007 and a jobless peak some time in 2010, forecasts the report, which covers the OECD's 30 mostly high-income member countries. [ID:nLAG003753]
"Things are going to get worse before they get any better," said Stefano Scarpetta, lead author and head of the employment division at the Paris-based Organisation for Economic Co-operation and Development.
"At the beginning it was essential of course to fix the problems of the financial sector, stimulate demand and bring the economy back on track ... now the social dimension of this crisis needs to be tackled, and aggressively," he told Reuters in an interview on the report released on Wednesday.
The danger, he said, was that some of the jobless rise would become entrenched more permanently at a "higher plateau".
The number of unemployed could have been 3.2 to 5.5 million higher OECD-wide but for fiscal stimulus programmes rolled out to support economies, with the damage limitation strongest in the United States, South Korea and Australia, said Scarpetta.
The recession is nonetheless killing more jobs than the oil crises that brought mass unemployment to much of the developed world in the 1970s and early 1980s, Scarpetta said.
The United States took four or five years to reverse the job losses of the 1970s and European countries took much longer, and never quite succeeded in some cases, he said.
Even if government policies were better now, the challenge remained daunting, notably for those on temporary contracts.
Upt to 85 percent of those who have lost their jobs in Spain's recession were on such contracts, mostly in the construction sector where a particularly big housing boom went bust.
The OECD-wide unemployment rate, at 8.5 percent in July, is already higher than any time since World War Two and could hit close 9.5 to 10 percent next year before the jobs haemorrhage slows, versus 5.6 percent at the end of 2007.
So far, that amounts to about 15 million jobs lost already since the start of the crisis and 10 million more to go in the next year or so if the OECD's forecast of a peak at 9.9 percent materialises.
Scarpetta said the unemployment rate might peak a little earlier in 2010 because of a somewhat earlier economic pickup than expected a few months back, and maybe at a marginally lower level than the 9.9 percent the OECD is officially forecasting -- what he now calls a worst-case scenario.
"It's maybe going to be somewhat lower but not that much lower because what we are seeing now is a longer, sluggish recovery," he said.
TEMPORARY WORKERS BEAR BRUNT
Spain, Ireland and the United States are respectively the countries where unemployment has risen most, with those who lose their job in the United States and Portugal most at risk of not being covered by benefit payments, Scarpetta said.
This was a particular concern for people on short-term work contracts, which have increased as a proportion of total employment from 12.7 to 18.3 percent in the Netherlands, 8.5 to 14 percent in Italy and 11 to 12.3 percent OECD-wide over the past decade.
Germany, and many other countries on a much smaller scale, have kept people in jobs by subsidising firms that keep staff on shorter work hours rather than letting them go.
Germany -- where legislative elections are due on Sept.27 -- even announced a marginal drop in unemployment in August, and its jobless rate at 8.3 percent has risen far less markedly than those of many other European countries. [ID:nBRQ007495]
However, such programmes risk shielding vulnerable jobs from overcapacity or other weaknesses, Scarpetta said.
"If the recovery proves to be longer (more protracted) than we are expecting it's going to be difficult to keep in place such a large scheme or even help workers who are at risk of losing their job," he said.
(Editing by Ruth Pitchford)