Tuesday, March 31, 2015

[DONDEQUIERA] The Magical Mystical Unemployment Rate: Inside Puerto Rico's mysterious drop in unemployment

[Roll up! Roll up for the magical mystery unemployment rate! Step right this way!]

The February unemployment figures came out for Puerto Rico and there was a surprising drop in the numbers; they dropped from 12.4 to 11.6%.  This was possible through a 9K+ net increase in employment.  And while the jump might seem dubious, unemployment has actually been dropping since October of last year.

Roll up, roll up for the mystery unemployment rate 
Roll up, roll up for the mystery unemployment rate 
Roll up (We've got everything you need), roll up for the
  mystery 
unemployment rate 
Roll up (Satisfaction guaranteed), roll up for the
  mystery 
unemployment rate

These days, I'm not even sure if unemployment rate is what Puerto Rico economists should focus on.  As I have suggested in the past, the labor force participation rate, is, for me, the most worrisome.

If we look, once again, at the U.S. Bureau of Labor Statistics, Economy At A Glance (Puerto Rico), we see a long steady drop in the labor force.  Starting in 2006, the decreases in the Puerto Rican labor force has dropped down to levels not seen since, 1989.

In total, there has been a drop of about 290 thousand participants in the Puerto Rico labor force since 2006.  Curiously, there has also been a drop of about 272 thousand people employed, during the same time period.  Finally, there has been a total population drop of 257 thousand, roughly the same amount, again, during the same period.

What's the narrative?

A reasonable explanation of these trends could be, as jobs were lost in Puerto Rico, a large majority of the unemployed decided to leave the island. So as the number of total jobs dropped, unemployment skyrocketed, but eventually leveled off, as more and more unemployed went off the grid.  They didn't migrate away, they broke with the Pack, and begin using informal economies to support their well being.

Enter the ever illusive, Puerto Rico informal economy.  The raison d'etat of 8 years worth of complete incompetence in all things IVU or IVA.  As was recently expressed, managing a micro-economy is hard, and few, if any, of our governmental leaders (and their administrations) have been in control of said micro-economy.

The magical mystery unemployment rate is coming to take you away 
Coming to take you away 
The magical mystery unemployment rate is dying to take you away 
Dying to take you away, take you today

Labor force participation rate, total (% of total population ages 15+) (modeled ILO estimate)

Getting back to the labor force rate, here is a graph from the World Bank.  Labor force participation rate is the proportion of the population ages 15 and older that is economically active: all people who supply labor for the production of goods and services during a specified period.  In Puerto Rico, this critical rate went from 48.9% (2005) to 42.6% (2013).  That means that only 4 out of every 10 people in Puerto Rico are working "inside" the traditional BLS type of "employment" model.  Prior to this drop the labor force rate had been climbing since 1990, where the rate was 44.7%.

And Here is The Kicker

So if all of the major economic indicators show declines in the past 8 years, how has the Puerto Rico gross domestic product(GDP) and GDP per capita been able to sustain their continued growth?  How is retail purchasing in Puerto Rico rising?  How?

[Dying to take you away, take you today]



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Publicado por Blogger en DONDEQUIERA el 3/31/2015 12:06:00 p. m.

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