Sunday, November 17, 2019

Puerto Rico economy giving mixed signals

By on August 21, 2019

(Photo by Harshal Desai on Unsplash)

Unemployment lower despite loss of jobs in key sectors

SAN JUAN — The economy of Puerto Rico is giving mixed signals, according to recently released data that show the continuation of an apparently booming job market and growing tourism, but also indicate lower retail sales and fewer jobs in such areas as office- and health-related work, as well as construction.

According to the Working Group Survey of a representative sample of households, the unemployment rate on the island reached a historically low level of 8.1 percent in July, or a 0.7 percentage point drop compared with the 8.8 percent registered the same month last year. The unemployment rate in June stood at 8.4 percent.

Puerto Rico had an estimated 88,000 people unemployed in July, 8,000 fewer than the 96,000 unemployed the same month last year.

Half of the people unemployed in July had been out of the job for five weeks or less, while 19 percent had been unemployed for 15 weeks or more, according to the survey. About 44 percent of survey respondents said they were laid off and do not expect to be called back to work, while another 14 percent said they had completed temporary employment.

The estimated number of employed people on the island reached 998,000, an increase of 2,000, or less than 1 percent, compared with the 996,000 employed the same month last year, according to the survey. July’s employment number represents an increase of 8,000 compared with June’s 990,000 employed.

The labor force participation rate was 41.7 percent in July, rising 0.6 percentage points compared with the 41.1 percent the same month last year, but a 0.2 percentage point drop compared with June’s 41.9 percent. In a related figure, the island’s labor force stood at nearly 1.1 million in July, an increase of 5,000 compared with the June figure but 6,000 fewer than in July 2018.

The number of people age 16 or older, on which the survey is based, decreased by 41,000, or 1.5 percent. This sector of the population fell from 2.68 million in July 2018 to 2.64 million in July this year.

Sales-related jobs, as well as managerial and professional employment, which includes teachers, grew by 23 percent between July 2018 and July 2019. The number of people employed as machine operators, assemblers and inspectors rose 12 percent during the same period.

On the other hand, the number of people holding office and management-support jobs, which include secretarial work, dropped 22 percent between July 2018 and July 2019, according to the survey, which showed there were 21 percent fewer health technicians employed during the same period.

Also dwindling was the number of people holding service-related jobs, including those in domestic and security-related work, which dropped by 11.4 percent between July 2018 and July 2019.

Construction drops

While this survey does not explicitly identify construction as a category, the number of related workers in the survey, such as carpenters, bricklayers and foremen, fell by 4 percent during the same period. Construction is considered a key driver of the modest economic recovery in Puerto Rico after federal disaster recovery aid began to be disbursed in the aftermath of hurricanes Irma and Maria in 2017.

Even this economic uptick seems to be petering out with the completion of post-hurricane repairs and billions of dollars in additional permanent reconstruction funding for the island being held up due to factors ranging from federal bureaucracy to a loss of confidence in island officials after two former island agency heads were indicted for mishandling contracts that involved federal recovery funds.

The commonwealth’s Economic Activity Index registered its first year-over-year drop in June after rising for 11 consecutive months.

In fact, after registering double-digit increases last year, sales at hardware and home furnishing stores plunged 32.4 percent and 37.2 percent, respectively, between April 2018 and April 2019, according to the latest Puerto Rico Trade & Export Co. establishment survey, which stated that general retail sales fell nearly 3 percent during the same period. Sales at hardware and home furnishing stores have fallen 22 percent and 20 percent, respectively, between January and April this year, according to the survey.

The same survey found that sales and new and used automobiles fell 3 percent between April 2018 and April 2019, but rose 8.4 percent between January and April this year.

Moreover, sales at sports, musical instrument and entertainment establishments fell 29.7 percent between April 2018 and April 2019, and dropped 28.6 percent from January to April this year. Sales at restaurants and places where alcoholic beverages are sold also fell 2 percent between April 2018 and April 2019, and dropped 5.1 percent between January and April of year.

Meanwhile, the number of people staying at Puerto Rico lodgings increased 22.7 percent between fiscal year 2018 and fiscal 2019, which ended June 30, according to the commonwealth Tourism Co. Registrations in Tourism Co.-certified lodgings increased from 1.51 million in fiscal 2018 to 1.85 million in fiscal 2019. However, the occupancy rate fell from 76.4 percent to 67.7 percent during the same period.

Economist Heidi Calero recently told Caribbean Business that she considers the construction-driven economic uptick “a prelude to a recovery,” noting that many times more investments are needed on the island to get it out of what she calls a decade-long depression.

Economists have cautioned against reading too much into comparisons with economic data from 2018, given that at the time the island was still in the process of recovering from the onslaught of hurricanes Irma and Maria, and many businesses had yet to be fully operational amid lingering power blackouts.

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