Fiscal austerity and tough labour reforms have failed to create jobs, leading to an "alarming" situation in the global employment market that shows no sign of recovering, the International Labour Organization said.
In advanced countries, especially in Europe, employment is not expected to return to pre-crisis levels of 2008 until the end of 2016 -- two years later than it previously predicted -- in line with a slowdown in production.
An estimated 196 million people were unemployed worldwide at the end of last year, forecast to rise to 202 million in 2012 for a rate of 6.1%, according to the United Nations agency's annual flagship report, World of Work Report 2012.
"Austerity has not produced more economic growth," Raymond Torres, director of the ILO Institute for International Labour Studies, told a news briefing on Sunday.
"The ill-conceived labour market reforms in the short-term cannot work either. These reforms in situations of crisis tend to lead to more job destruction and very little job creation at least in the short-term," said Torres, the report's lead author.
Long-term jobseekers are demoralised and an average of 40% of job seekers in their prime (aged 25-49) in advanced countries have been without work for more than a year, the report found.
Youth jobless rates have soared, increasing the risk of social unrest especially in parts of Africa and the Middle East.
The labour market overall has deteriorated over the past six months, with a very significant slowdown in the case of European countries, Torres said.
Unemployment is growing in a significant number of countries, including more than two-thirds of European countries over the past year.
"The narrow focus of many Eurozone countries on fiscal austerity is deepening the jobs crisis and could even lead to another recession in Europe," he said.
"In addition, there is less progress happening in other parts of the world, for example the United States, where progress in reducing unemployment seems to be slowing down and this seems to be a trend," he said.
Labour market recovery has also stalled in Japan, the report said. Employment rates have stagnated or "double-dipped" in China, India and Saudi Arabia, while Latin America is healthier, marked by improvements in Argentina, Brazil and Mexico.
"The report clearly points to the combination of austerity measures with ill-conceived labour market reforms as the real cause for deterioration happening in Europe and little by little spreading to other parts of the world," Torres said.
In Spain, unemployment shot up to 24% in the first quarter, its highest level in almost two decades and one of the worst jobless figures in the developed world, according to figures issued last Friday. Standard and Poor's downgraded the government's debt by two notches.
The number of jobless in France rose for the eleventh month in March to hit the highest level since September 1999, according to labour ministry data released on Thursday.
The EU, which generates about a fifth of global output, has struggled to strike a balance between austerity and growth as it seeks to overcome a decade of runaway spending while grappling with recession.
Only six advanced economies have seen employment rates grow since 2007: Austria, Germany, Israel, Luxembourg, Malta and Poland.
The report recommends countries would do better to boost job quality and reinforce institutions, rather than deregulating labour markets.
It also suggests better use of European Structural Funds as well as an increase in minimum wages in European countries "as a way to put a floor on recession in Europe."
"At the ILO we understand that fiscal deficits cannot remain high for long. It is important to have a medium-term fiscal consolidation strategy," Torres said.
"But it is a question of pace and of content of fiscal consolidation. The pace has to be realistic," he said.