Local economist sees growth, lowest unemployment rate in recent years
By The Star Staff
Puerto Rico’s economy is growing and is currently registering the lowest unemployment rate in recent years, economist José Caraballo Cueto said.
“Certainly, the unemployment rate of 5.8% that was registered in May is probably the lowest rate that has been registered in Puerto Rico since the unemployment rate began to be measured. That is proof that the economy is growing,” Caraballo Cueto said on a radio program (NotiUno). “In fact, employment has also increased, it is over a million. There are more than 1.1 million people employed in Puerto Rico and that is 200,000 more than there was five or six years ago.”
Caraballo Cueto also expressed confidence that after the COVID-19 pandemic there are many people who have chosen to be self-employed.
The monthly report on Employment and Unemployment issued by the Department of Labor and Human Resources (DTRH) and corresponding to May 2022 highlights the continued decline in local unemployment. The unemployment rates for May 2022 and January 2021 were 8.1 percent and 9 percent, respectively.
The labor participation rate, meanwhile, was at 43.6 percent for May 2022. The figure reflects a percentage point increase of 0.9 compared to May of last year. The labor force had an increase of 63,000 people year over year, for a total of 1,215,000 people. Regarding unemployment, the seasonally adjusted amount stood at 75,000 people in May 2022, which represented a decrease of 3,000 people when compared to April of this year, which was around 78,000. Similarly, the number of people employed on the island as of May 2022 was 1,134,000, some 67,000 more than on the same date the previous year.
The Center for a New Economy (CNE) said recently that Puerto Rico faces the next stage in its economic development. After 15 years of economic stagnation, a fiscal and debt crisis, the bankruptcy of its government, the damage caused by hurricanes Irma and Maria in 2017 and a series of earthquakes in 2020, and the pain inflicted by the COVID-19 pandemic, Puerto Rico has a once in a generation opportunity to turn its economy around.
Nonetheless, the CNE said there are risks.
“First, inflation is currently at levels not seen since the late 1970s and early 1980s. Price increases are driven, in part, by strong consumer demand in the post-pandemic period; supply-chain disruptions; logistical bottlenecks; China’s zero-COVID policy which has shut down significant manufacturing capacity in that country; and commodity shortages and higher oil and gas prices due to the invasion of Ukraine by Russia,” the CNE said.
“Second, there is a significant risk of a recession within the next 18 months,” the CNE continued. “While there is not much that monetary policy can do with respect to commodity prices or supply chain disruptions, the Federal Reserve really has no other option but to tighten monetary policy because the current rate of price inflation is politically untenable. As interest rates increase, we would expect demand for credit to decrease as car loans, mortgages, and carrying credit card balances all become more expensive. In addition, some new investments in machinery, equipment, and construction may become financially unviable when taking into account the higher cost of capital.”
“Finally, there are risks endogenous to the Puerto Rican economy, mostly on the fiscal side,” the CNE noted. “Among those risks, we find a potential shortfall in federal Medicaid funding for Puerto Rico; the end of the federal policy allowing U.S. manufacturing companies in Puerto Rico to take a credit at the federal level for excise taxes paid pursuant to Act 154; and the slow roll-out of reconstruction funds. To the extent any of those risks materialize, then the island’s fiscal situation could be destabilized.”
“In sum, our net assessment of the current situation is that, notwithstanding the existence of certain substantial risks, current conditions are auspicious for undertaking a broad-based economic development effort in Puerto Rico,” the CNE said. “Several positive trends are clearly converging in 2022 to create the opportunity of a generation for Puerto Rico to turn around its economy and start a process that would generate long-term economic growth and development. However, that will happen only if we design an economic strategy that allows Puerto Rico to take advantage of this opportunity. Economic growth will not happen on its own. We need to take concrete, affirmative actions to make the most of the current situation.”