The term "recession" has no precise professional
definition. It describes a certain feeling or mood. We
talk of recession when business sector output and
employment are in retreat. Also, when the number of
available jobs lags behind labour force development, or,
in other words, when unemployment starts to increase, a
recession atmosphere sets in.
The Israeli economy, from any of the above angles, is
still not actually in recession. However, it is headed in
that direction, as the slow-down worsens. To understand
how an actual recession may will be imminent, we must
note the preparations being made by the productive
sector.
Neither the industrial nor similar sectors hasten to
respond to every change of the economic winds. Export
enterprises, especially, make six months to three years
advance commitments to ongoing transactions. Even in
absence of a signed contractual engagement, a plant
having recently invested in equipment, R&D, marketing or
personnel training, will be very leery about turning in
its tracks and will prefer, in the interim, to absorb
low profits or even losses.
This normative line of conduct precludes sharp
reactions in the form of dismissals or a stoppage of
investments following a freeze of the exchange rate or
when, for any reason, domestic demand has shrunk. By the
same token, neither does the infrastructure leap up all
at once at the onset of incipient expansion.
The foregoing can be illustrated in terms of the
evolution of the manpower establishment in the past
decade. The previous exchange rate freeze cycle commenced
in July 1985, but the manpower establishment shrank badly
and visibly only in 1988 and 1989. The wave of
immigration, breathing its accompanying message of
optimism, commenced at the end of 1989. But the number of
employees in industry further decreased in 1990, and not
until 1991 and thereafter was recovery seen to resume.
For a period of five years, industry was absorbing
workers on a large scale, at a progression rate of 4% per
annum. Yet a pattern of development was discernible,
peaking at 4.3% in 1993, and falling back 3.6% and 3.8%
respectively in the next two years. The downslide first
became perceptible in 1996, the rate of change meanwhile
measured by comparison with the preceding year coming to
2.3%.
Even if a devaluation takes place now, and even if a
full economic programme is presented, industrialists will
be in no hurry to reverse direction. There will be quite
a lengthy interim period in which they will sit on the
fence, trying to contain the damage already incurred.
Based on all of the foregoing, we may expected a further
step down in the rate of change of wage earners in
industry. And if in the period 1995-96 the relevant
figure fell from 3.8% to 2.3%, one need hardly be a
professional Cassandra to forecast that the figure will
be around zero in 1997.