Jamaica’s labour market conditions, which have taken a hit from the novel coronavirus pandemic, will worsen over the next two years based on latest projections by the Bank of Jamaica (BOJ) supported by independent economic analysts.

Jamaica has made significant progress over the years by bringing the unemployment rate to the lowest on record, but fallout from the pandemic has wiped out all the gains made, to the extent that the latest projections suggest that the labour market conditions will worsen over the next eight quarters.

The BOJ’s recently published Quarterly Monetary Policy Report, which provided a mid-year health report on the Jamaican economy, indicated that the improvements will only come after two years, with the medium-term rebound in economic activity.

“In this regard, the average unemployment rate over the June 2020 to March 2022 quarters is projected to increase to 10.3 per cent, within the range of 10.0 per cent to 12.0 per cent relative to the 7.5 per cent over the past year.

The employed labour force is projected to decline, year over year, at an average rate of 0.6 per cent per quarter, even while the labour force is projected to decline, the BOJ report stated. 

INCREASE IN UNEMPLOYMENT OVER FOUR QUARTERS

The Quarterly Monetary Policy Report noted that the anticipated increase in unemployment, particularly over the next four quarters, is in contrast to the continued moderation, which was forecast in the previous projection. The expected increase in unemployment is anticipated mainly in tourism, construction and wholesale and retail industries.

Economic analysts have agreed with the BOJ’s projection that the unemployment rate is expected to decline in tandem with the reopening of ports, resumption of travel and tourism-related activities, and as production in other sectors of the economy is revived.

The analysts from NCB Capital Markets Limited pointed to January 2020 when the unemployment rate fell to 7.3 per cent which was 0.7 per cent below the rate in January 2019.

They emphasised that this gain in employment levels came against the backdrop of a three per cent (36,400) increase in the employed labour force. 

LESSENING THE IMPACT

Around the world, policymakers are pulling out all the stops to help lessen the impact of the novel coronavirus pandemic on their economies and increase the possibility of a faster recovery. In Jamaica, the first half of the year was marked by worsening key economic variables.

However, while COVID-19 challenges are still ongoing as the country grapples with a second wave of the virus, the BOJ has maintained its accommodative monetary policy stance, to support speedy economic recovery, when the virus recedes.

In the second half of the year, although the Government gradually but cautiously reopened certain key sectors of the economy, the country is still a very long way from pre-COVID-19 levels of economic activity.

Although some variables, such as economic growth and unemployment have deteriorated, there are other variables such as inflation that have given readings that are still in the healthy range.

Despite many social and economic impacts of the pandemic, the central bank’s monetary policy stance remains conducive to sustain price stability, as inflation remained within target at 5.7 per cent for the twelve months leading up to July 2020.

This inflation rate was mainly influenced by higher prices for food, electricity, water and sewage rates.

The BOJ predicts that the inflation rate will continue to remain within target over the next three quarters owing to a deceleration in agriculture and processed food price inflation and higher imported inflation.

While price stability has been sustained, second-quarter figures showed, as expected, that economic growth took a beating due to the containment measures implemented, both locally and overseas, to stem the spread of the novel coronavirus.