If Prime Minister Benjamin Netanyahu needs a sign about the state of the economy, the unemployment figures published today by the Central Bureau of Statistics can give him food for thought as the elections draw near.
It's true that many countries worldwide would be happy to have Israel's growth and employment rates, especially with the deep crisis in Europe, but there should be no mistaking the message that output and employment data are sending - the Israeli economy is moving towards a slowdown and this is happening at the start of an election campaign.
There are three figures that must worry policymakers: the fall in exports, the fall in industrial output, and the rise in unemployment. The latest indicators available for the first quarter of 2012 show that exports of commodities fell 5.6% between January and March on an annualized basis, after rising 3.1% in the final quarter of 2011. The industrial manufacturing index for January and February 2012 fell 0.4% on an annualized basis after rising 4.1% in the preceding two months.
The public is indifferent to statistics
The picture is not particularly rosy in the employment market although it is difficult to make comparisons with the previous two months because of the change in method of measuring unemployment by the Central Bureau of Statistics. According to the latest figures, unemployment among the work force for 15 year olds and above was 6.7% in the first quarter of 2012, reaching 6.9% just for March.
These were not the figures that the prime minister was dreaming about at the start of a month when he will probably declare new elections, and especially not the employment figures he would have wanted. Nevertheless, these figures will probably not keep him awake at night. These are for the time being just statistics and it is doubtful if Israeli citizens are aware of their significance.
The public debate at the start of the election campaign will not deal with industrial manufacturing or the level of employment in March compared with previous months. It will deal with questions about dividing up the economic burden, budget priorities - signs of a slowdown are still seen as abstract. And that is until the moment when a worsening is felt - and we are still far from that. We are not Europe and that is all that we need to know.
Taking action is down to Fischer
The person who does have to be concerned about these latest figures is Governor of the Bank of Israel Prof. Stanley Fischer. The slowdown in the economy poses some difficult challenges for his monetary policy. For example, the 3.5% annual rise in the Consumer Price Index in the first quarter of 2012.
The rise in inflation is happening at a time when Fischer has all the reasons in the world to be concerned about the government losing control of its budget, even before elections have been called. Fischer and the Bank of Israel might find themselves as the only player, compelled to cope with a continual worsening with the interest rate as the only tool at their disposal. Interest rates must deal with rising inflation, and falling exports. The rate must contribute to financial stability, while at the same time helping the business sector to meet falling demand.
The bottom line, even if the Central Bureau of Statistics figures don't yet fully confirm it, is that the economic celebrations planned by Netanyahu and his Finance Minister Yuval Steinitz for their election campaign have been spoiled. At any rate the celebrations will be less festive. Instead we can think about pocket of growing discomfort among the public and about Fischer, who the politicians are about to put in an almost impossible situation.
Published by Globes, Israel business news - www.globes-online.com - on April 30, 2012
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