By Dean de la Paz / Through the Looking
Glass
LAST
month at least one major broadsheet bannered the bad news. Despite
what seemed like resplendent growth during the first two quarters,
critical employment data seemed to brazenly ignore what Benigno
Aquino III would have us believe are the fruits of his skilled
economic management.
That
we were coming from a stupidly self-inflicted recession in 2011,
Aquino’s first full year of governance, is important. If indeed
gross domestic productivity (GDP) growth had fallen from 7.1 percent
in Gloria Arroyo’s last year to a miserable 3.8 percent in Aquino’s
first, then this year’s first quarter growth of 6.4 percent should
have produced new jobs and jump-kicked employment.
Without
vibrant employment, consumer spending, a critical factor in the GDP
formula, will not come about. Amid worsening aggregate prices as a
result of the inability of Aquino’s economic managers to control
multipliers such as utility tariffs and fuel costs, then raging
unemployment worsens consumer spending.
The
benchmark model that relates GDP growth to employment was established
by economist Arthur Okun from empirical observations from the 1950s
to the middle 1960s. While Okun’s controversial law was hardly an
economic statute, it explained to some degree lags and contradictions
between growth and employment.
The
rule of thumb is that for every percentage increase in the
unemployment rate, GDP will be additionally lower than its potential
by approximately 3 percent or more. In its original form, the
approximation states a 3-percent output increase yields a 1-percent
decline in unemployment. Spun on its head and then analyzed against
the data initially founding the math, GDP growth must first breach
3.4 percent lest unemployment remain fixed.
Recent
jobs data shows unemployment at 7 percent. That’s a magic
threshold. In the United States, save for Ronald Reagan, every
presidential re-electionist lost their bid for a second term when
unemployment was at 7 percent. In Europe, when the global financial
crisis bankrupted the small fishing and merchant banking economy of
Iceland, their unemployment fell to its worst level at 7 percent.
Ours
is now at that level yet Aquino effectively claims we are virtually
dazzling in our productivity. It is to our misfortune he was not a
better student of economics.
If
we grew at 6.4 percent, given Okun’s math we should have less
unemployment. We don’t. Might all the hyperbole about growth, as
seasonally unadjusted as it is, been nothing more than bovine bunk?
Let
us analyze Aquino’s jobless growth.
Between
April and July, government data shows 40,000 jobs were lost bringing
the jobless to 2.84 million, or, exactly 7 percent unemployed.
Independent
private polls estimated the jobless at 13.8 million, or 34.4 percent
unemployment. That’s a difference of nearly 400 percent, a
discrepancy too large to be due to political hype. Aquino’s numbers
are based on government’s Labor Force Survey (LFS). The LFS ignores
those who’ve given up looking for work, lost hope and are no longer
available for employment.
We
claim Philippine GDP grew faster than Malaysia, Thailand, Vietnam and
even Singapore. Yet arrayed against each, our 7-percent unemployment
rate multiples higher. Malaysia’s was 3.1 percent, Thailand, 0.7
percent, Vietnam, 2.0 percent, and Singapore, 2.7 percent. The
regional average was 3.2 percent.
As
ludicrous as the discrepancy between Aquino’s jobs data against a
private institution’s count, the quantitative anomaly against
neighboring economies and against the employment record is just as
ridiculous.
Incredulity
turns for the worse when we consider the underemployment rate. Within
three months, the underemployed rose posting an astonishing
underemployment rate of 22.7 percent—the highest since 2006 12
years ago.
Keynoting
a recent call-center conference, Aquino highlighted our
business-process outsourcing sector and its impact on growth. Again,
note the incredulity. While the government identifies the services
sector as a principal GDP driver and a booming industry, it is ironic
that the highest underemployment rate was also in that sector
accounting for over 42.5 percent of the underemployed.
The
rate reflects the stark absence of quality employment available under
Aquino. Underemployment implies low economic contribution to
productivity.
If
indeed Aquino is creating jobs, these must be low-quality,
undercompensating work with low-economic contributions. Had Aquino
used seasonally adjusted GDP data then he would have realized how
anemic our growth really is and how, as in 2011’s recession,
between the first quarter and today, rather than grow, GDP had
actually contracted.
No comments:
Post a Comment