Unemployment will continue rising in 2003 ... may go as high as 25%
<a href=www.vheadline.com>Venezuela's Electronic News Posted: Monday, April 14, 2003 By: VenAmCham
VenAmCham's Jose Gregorio Pineda (chief economist) and Jose Gabriel Angarita (economist) write: Venezuela's unemployment will undoubtedly rise to extremely high levels by the end of this year. That prediction is based on the severe difficulties being experienced by the country's private sector, which will be reflected in still more lost jobs.
In the first place, after 2002 ended with a historically unprecedented 8.9% contraction provoked by intense political conflict and poor government economic policy management, an economic climate extremely adverse to business activity has sprung up and has only worsened since the foreign exchange market was shut down on January 21, 2003.
The effects of last year's experience, and those of this year to date, have yet to be reversed; quite the contrary, they have continued and will go on making themselves felt due to the large number of companies with serious operating problems (many have had to shut down). In addition to business, the hardest hit economic sector has been labor, as workers find it increasingly difficult to hold onto their jobs and those already unemployed have less and less of a chance to rejoin the labor market.
Out of the economy's total supply of labor (the 11.7 million members of the Economically Active Population-EAP) according to the National Institute of Statistics (INE), 1.8 million people had no jobs at the end of 2002. Not only that, but the proportion of people working in the economy's informal sector reached 51.2% in the last quarter of 2002, meaning according to the INE that more than 5 million people were doing low-productivity work such as street vending or working in firms with fewer than five employees, as household employees, salespeople, craftsmen, taxi drivers, painters, or carpenters.
The distortions now burdening the economy, the high level of government intervention in economic activity, and the population's falling consumption and purchasing power only make it clearer that labor conditions will continue worsening over the rest of the year. By our estimates, unemployment will reach the 23% to 25% range in 2003, reflecting over 2.5 million unemployed workers. This spreading unemployment, on top of working people's low purchasing power, will deprive more and more Venezuelan households of access to the basic consumption basket (food and services-utilities), which now costs about 600,000 bolivares per month.
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