EVERY FEW months the parties have a row about the persistently high unemployment rate. On Monday, after it was reported there was a drop in unemployment in the second quarter of the year (from 17.7 per cent to 14.4 per cent), AKEL attacked the government for “playing games with numbers, creating false pictures and celebrating while people were suffering.” On a less emotive level, one of its spokesmen argued that unemployment always fell in the second quarter because of the tourist season.
This was a valid point and what was a more reliable pointer of the trend was the comparison with the same quarter in the previous year. The number of jobless in the second quarter of 2014 was 15.4 per cent, the one percentage point decrease this year not justifying much optimism. A representative of the DISY youth wing was more restrained in the positive spin he put on the story, saying this allowed us to “confirm the right direction in which the economy is heading and to persist with it.”
The truth is that it is very easy to put a negative spin on the high unemployment figures although nobody seems able to tell us how to bring them down. This is because there is no quick-fix solution to the problem.
Development projects that opposition parties are clamouring for might offer some relief and create a couple of thousand temporary jobs but state spending cannot bring about a real recovery.
Only the private sector could do this but unfortunately most private businesses are in no position to expand and create jobs. Too many are still struggling to restructure their loans in the hope of staying afloat – streamlining operations and cutting costs are the only options for most businesses at present. Even the healthy businesses that are not burdened with crippling loans would be very reluctant to expand and hire staff. It is not just a matter of low business confidence that could be reversed.
The real problem is that a major correction of the market distortions, caused by years of easy bank credit, is taking place. The economy grew because of the mindless lending by the banks, which never considered whether the borrower would be able to repay his loans. The full employment we recorded in the boom years was artificial as it was sustained by bank loans rather than a rational model of economic growth. And now the economy is returning to a sustainable size, which might operate for many years to come with a double-digit unemployment rate.
This is the sad economic reality that our politicians – both in government and in opposition – pretend not to be aware of when they are having their futile rows about unemployment.