Unemployment rate does not add up, retired banker warns
The actual number of unemployed people tells a more revealing story about the state of the labor force than the unemployment rate does, according to retired senior banker Al Jarrett.
Comparing the unemployment data from 2009 and 2011 labor force surveys, the average job creation over the last two years was poor, according to Jarrett, and far off the number of jobs needed to return The Bahamas to pre-recession conditions. According to Jarrett, the data suggests 260 more jobs created in two years, based on the difference in the number of unemployed between the two periods.
“When you look at unemployment in 2009 at 26,215 versus 25,955 in 2011 — it’s an average of 130 jobs per annum, which renders the number negligible,” Jarrett told Guardian Business.
The mathematics of new job creation are not as simple as comparing the number of unemployed across the periods, however. The number of unemployed could remain static in two periods with the number of employed contracting or expanding significantly, along with the labor force.
The labor force statistics provide an example, although the job growth, mostly from informal activity, may not be so “significant”. Though there were 260 less people unemployed in 2011, the number of employed in the labor force grew by 6,315 persons, and the labor force itself grew by the difference – 6,055 persons. If only 260 jobs were created and less people overall were unemployed – how are the additional 6,315 employed people accounted for?
That said, Jarrett may have found an ally at the Department of Statistics (DOS) in championing the need to focus on the actual number of unemployed and not so much the unemployment rate.
“The fact is, people are talking about the unemployment rate – the rate has gone down slightly, but that is mostly because the participation rate has gone down,” DOS Director Kelsie Dorsett told Guardian Business.
She said the increase in discouraged workers and informal sector employment caused the reduction in the unemployment rate.
“The fact is, whether the rate has gone down or not, we are still looking at 25,000-odd people who are unemployed. That is a lot of people,” Dorsett added.
The real number to focus on is the rise in discouraged workers, according to Jarrett, now at 11,900. The figure was 3,075 people greater than in 2009’s survey – Jarrett comparing the growth against the 260-person decline in the unemployment number over the same period.
“We know that discouraged workers are unemployed so one would have to add them to get a good feel for it,” he said. With discouraged workers included, the number of unemployed balloons to 37,855. Discouraged workers are not included in the labor force count. If they were counted as unemployed, the total workforce would also expand to 201,975, meaning the unemployment rate would be 18.7 percent.
Dorsett said the department was planning to release a report on the labor force’s underemployment levels, with a target of September for completion. There is a fairly involved and technical process for completing the underemployment study, she explained. The results should add value to released labor force data, giving researchers, businesses and government more insight into the level of utilization of available skills in the economy.
From Jarrett’s perspective, the near 38,000 unemployed means that many more jobs will have to be created to return the Bahamian economy to its highest performance levels.
“Based on the macro-economic decline, The Bahamas will need 10,000 jobs per annum to reach pre-recession levels,” Jarrett said.