THE IMPORTANCE OF playing the psychological game is very well understood in politics. It explains why a player like Donald Trump is contending for the presidency of the United States of America.
Here at home, it explains why the unemployment rate dropping below ten per cent in the first quarter of 2016 is being proclaimed as a success story, even though the Government’s policies have been designed to stifle spending and employment.
There has always been a seasonal component to the unemployment rate. When sugar was king, coupled with the winter tourism season, economic activity peaked during the first quarter and this continues notwithstanding the plight of sugar production.
The unemployment rate is therefore expected to go back into double digits in the next quarter, when economic anaemia picks up and several thousand students enter the labour force. Other seasonal factors will influence the rate during the Christmas period.
It is not in my nature to question the statistics provided by the Barbados Statistical Service. I am certainly not in a position to call major companies to provide my own unemployment statistic as was done by the governor of the Central Bank. It is, however, in my nature to try to analyse the statistics.
In this regard, I will have a go at the recent unemployment rate for the first quarter of 2016. To do so, it is necessary to: (1) find a previous year that had a similar first quarter unemployment rate to that for 2015; (2) provide the unemployment rate for the first quarter of 2016, and (3) compare the time it took for the rate in (2) to be reached in the earlier period.
According to my research, the years 2003 and 2015 are similar with respect to the unemployment rates in the first quarter, with 11.7 per cent and 11.8 per cent, respectively. It was not until the first quarter of 2005 that the unemployment rate declined to 9.9 per cent. More importantly, only 1 100 more people were employed over the two-year period.
So why did the Government not proclaim the efficacy of its policies earlier? The answer is that the psychology was not right. Now that the psychology is right, the numbers appear not to be. This is the year for feeling good, notwithstanding the reality of life in Barbados, after eight gruelling years of economic pain. It is believed that this pain can be reversed by the appearance of hope that needs no definition or covenant.
The estimated unemployment rate for the first quarter of 2016 is given as 9.3 per cent. So it has taken just one year for the rate to fall when compared to two years between 2003 and 2005. More importantly, a whopping 3 700 more people found work in the one year. Wow! Strangely enough, in the previous year March 2014 to March 2015, some 3 900 more people found work. Another wow!
The next best first quarter employment performance was in 2007 compared to 2006, where 2 100 more persons found work.
The Barbados economy was bigger in 2007 than it is in 2016. Between 2005 and 2007, the economy grew in dollar terms by almost 17 per cent compared to about three per cent for the two-year period, ending March 2016. Yet the more recent two-year period experienced job creation of 7 600 compared to a meagre 1 800 jobs in the earlier period. Another wow!
It is important to note that even though Barbados’ population is bigger now than in 2003, the labour force had 2 000 more people in 2003. This is very significant. It may be explained by the fact that 77 300 people are inactive in the labour market in 2016 compared to just 63 000 people in 2003.
As recently as 2014, the number of inactive people totalled 82 900, which put the labour force at 5 000 people less than now. To the layman, these statistics mean very little but they play a critical role in determining the unemployment rate.
Some years ago, a prime minister highlighted the category of voluntary idle in the labour force to suggest that it is used to influence the unemployment rate. He was suggesting that the larger the inactive category, the smaller the number of unemployed people. This finding also reduces the labour force; but its impact on reducing the unemployment rate is greater purely because of the arithmetic.
There is no statistic that the politician enjoys spinning more than the unemployment rate, especially if it appears to favour him. The problem, however, is consistency, with which the Government’s economic spokesmen have severe difficulty.
Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email: clyde_mascoll@hotmail.com