The Lebanese economy is on a tailspin, having undergone a severe financial crisis and, since September 2024, a major war escalation with Israel. Estimates of the effects of the crisis and war on unemployment and labor markets have been patchy and perhaps off the mark. For example, the Minister of Economy claimed that unemployment rose from 50% to 70% because of the war[1], an estimate that we think is notably overvalued. In this Economic Digest, we would like to provide a new estimate for the unemployment rate in 2024, and to update a few labor market indicators.
| % | Cumulative GDP Growth | Unemployment |
| 2018 | — | 11.4 |
| 2022 | -35.9 | 29.6 |
| 2024 | -9.5 | 34.4* |
Sources: WB and UNDP for GDP; CAS for unemployment
* Our Estimate
The Central Administration of Statistics (CAS) put the unemployment rate in 2018 at 11.4% which increased to 29.6% in 2022. No estimate has been provided for 2024 yet; so we will try to provide it here. World Bank (WB) figures put the cumulative change in GDP growth in 2019-2022 at -35.9%, which in turn increased the unemployment rate by 18.2%; or a 2% decline in GDP growth produced an exact increase in unemployment by 1% (what is referred to in the economics literature as Okun’s Law). Given that UNDP projects the cumulative change in GDP growth to be -9.5% in 2023-2024[2], then accordingly the resulting increase in unemployment will be 4.8%, thus raising the unemployment rate to 34.4% in 2024. We consider this to be a reasonable estimate, though it could be on the low side if the severity of the war is enhanced in the last two months of 2024, and vice versa.
| 2018 | 2022 | |
| Labor force (mn) | 1.79 | 1.68* |
| Economically Active (mn) | 3.67 | 3.87* |
| Population (mn) | 4.84 | 5.11* |
| Participation Ratio % | 48.8 | 43.4 |
| Employment Ratio % | 43.3 | 30.6 |
Source: CAS
* Our Estimate
What about other important labor market indicators? As the above table shows, CAS figures provide the relevant data for 2018; and only the data for the participation ratio and the employment ratio for 2022. So we have to estimate the remaining figures. In definitional terms, the participation ratio is the ratio of the labor force to the economically active population (those aged 15+); and the employment ratio is the ratio of the employed to the economically active population.
As such, to calculate the size of the economically active population in 2022, note that the employment ratio fell by 12.7% between 2018 and 2022; but given from our earlier discussion that employment fell by 18.2%, then the economically active population must have increased by 5.5% only between 2018 and 2022, which makes it equal to 3.87 million (mn) in 2022. In addition, given also that the participation ratio was 43.4% in 2022 then the resulting labor force was equal to 1.68 mn in 2022. And if we assume that total population grew at the same rate as the economically active one of 5.5% (in reality, though, it should grow at a lower rate because with declining fertility rate those aged 15- grow at a lower rate than those aged 15+). This makes total population equal to 5.11 mn in 2022.
These are interesting findings; and they are getting worse. Between 2018 and 2022 the labor force fell by about 100,000 – a serious brain drain; and population grew at an average annual rate of 1.3% – most likely below the replacement rate. In addition, recent estimates claim that 200,000 Lebanese have left the country in 2024 alone[3], and of course we are still counting. Also, what makes these figures highly disturbing is that most of those who left have reached the point of no return – both literally and figuratively!
[1] Al Sharq Alawsat, October 24, 2024 issue.
[2] UNDP, Economic and Social Consequences of the Escalating Hostilities in Lebanon: Rapid Appraisal, October 2024.
[3] Institute of International Finance, War in the Middle East: An Inflection Point, October 2024.