THE rate of unemployment rose to an eight-year high in January, according to the results of the Planning Institute of Jamaica's (PIOJ's) quarterly review of economic performance in the context of continued contraction of the economy and industry-wide declines.
The quarterly press briefing was held yesterday at the Institute's Oxford Road office but offered little surprises in the macroeconomic performance of the country over the January to March 2010 period, where all industries, except agriculture and tourism, declined and real GDP contracted by 1.4 per cent in the quarter.
Acting director general of the PIOJ Dr Pauline Knight announced that agriculture and the tourism industries were the only two to record growth over the period, while manufacturing, mining and quarrying and construction and installation all saw declines. Agriculture, forestry and fisheries increased 2.5 per cent, registering a 20.8 per cent growth in traditional export crops and fishing, which was up 8.8 per cent, and animal farming, up 3.1 per cent. However, Knight indicated that the prolonged drought conditions caused a 1.4 per cent decline in other agricultural crops.
In tourism, total arrivals increased 0.9 per cent, stopovers grew by 8.6 per cent while the real value added from hotels and restaurants grew 6 per cent, offsetting an 11.1 per cent decline in cruise visitors.
But the continuing decline in GDP takes place within the context of a 4.1 per cent increase in inflation and an unemployment rate of 13.5 per cent at the end of January 2010, "the highest rate recorded since October 2002", which was 15.4 per cent, said Knight. This occurred against the backdrop of increased unemployment in the areas of construction and installation, which lost 15,200 workers, transportation, storage and installation, 6,900 workers and private households, which let go 6,400 helpers. The total labour force at the end of January 2010 was 19,000 persons less than January 2009.
Knight suggested that increased bus and taxi fares, a new tax package which came into effect at the beginning of January, and consequently, higher food prices, contributed to the increased inflation.
For the fifth consecutive quarter, mining and quarrying was the main contributor to the downturn in the goods-producing sector, falling by 40.1 per cent as a result of a 50.6 per cent lower production in alumina following the continued closure of the Alpart and Windalco (Ewarton and Kirkvine) plants.
Manufacturing declined 2.3 per cent on a decline in food, beverages and tobacco. "The fall-off in manufacturing was influenced by lower petroleum production as well as a decline in production of some industrial chemicals," Knight disclosed.
The services industries remained flat, while the financial and insurance industries saw their second consecutive quarter of decline, contracting by 2.0 per cent in the quarter. This, Knight said, was as a result of the effects of the decline in net interest income following the Jamaica Debt Exchange (JDX), which was concluded during the quarter, and a reduction in loans and advances for commercial banks. The JDX was initiated by the Government of Jamaica to reduce its high debt service bill. It resulted in the exchange of high interest-bearing bonds for those with lower yields and longer maturities, effectively reducing the interest income many institutions had been earning from investment in the government paper.
"In the context of the JDX, what firms are having to do at this time is to have a review of their internal structure," Dr Christine Clarke, director, economic planning and research division at the PIOJ, told the Caribbean Business Report.
She said the negative growth is compounded by the "game changing" nature of the JDX, which the local financial sector is still in the process of learning how to manage. "It's one of these things that is game-changing, and so institutions are really trying to figure out how, exactly, they are going to operate. If they are really going to go in the productive sector, then it's a different type of staff, different type of qualifications and they are still, it would seem to us, working out all of those internal details to figure out what is the financial service that we are going to offer at the end of the day," Clarke said.
Other categories within the services sector declined. Wholesale and retail trade contracted by 1 per cent while government services fell 0.3 per cent. The PIOJ is predicting a 0.0 to 1.0 per cent growth in real GDP for the April to June 2010 quarter.