5.5% growth in 2010 means…?

Key Indicators: [Source: Statistics Singapore]

• GDP up 0.6% in Q32009
• CPI down 0.8% in Oct 2009
• Total Trade down 12.4% in Oct 2009
• Retail Sales down 11.8% in Sep 2009
• Index of Industrial Production up 3.6% in Oct 2009
• Total Population 4.99M in Jun 2009
• Employment 2.95M in Sep 2009
• Unemployment Rate (SA) 3.4% in Sep 2009
• Wages/Earnings (monthly average for quarter) S$3,562

It seems that despite the economic recovery ["Singapore declares its recession over"], unemployment is still pretty much a big concern in this country. We can always analyse the statistics and say things like “unemployment persist because of structural rigidities, especially since we recently came out of recession”, but try telling a PMET who had been retrenched and unable to find a job for the past 18 months just that, and see what kind of response you would get.

In a latest survey, private sector economists (from the financial institutions, obviously) projected optimistic figures for Singapore’s growth in 2010 – 5.5% [link here] but at the same time cautioned that economic growth will likely be “subdued”.

In all honesty, I don’t think the projected growth figures make sense to understanding and solving unemployment in Singapore– for one, you were polling fund managers and financial professionals whose agenda is more aligned towards making sure their clients’ financial portfolios remain attractive for them to stay invested. There has been a long-standing assumption that a recovery in the financial markets will always trigger actual economic activity and hence growth, but don’t be misled: it’s not always the case, even if the financial dudes in pin-stripe suits driving flashy cars and working from well-furnished offices continually try to convince you thus.

For one, consider the following sentence:

They are also counting on major economies stabilising so that consumer confidence can rebound and support manufacturing and export activity here.

Granted, we are an export oriented economy. It would then appear to make sense that if the major economies stabilise, consumer spending will necessarily increase, and with our manufacturing and export levels going up, it indirectly means more jobs to go around. Hurrah.

Take a good look at the words in bold– what these financial people (I don’t even want to call them economists) are telling you is this: we have no idea IF it happens but WHEN economies like the US and Europe recover, and we are very optimistic they will come back in a big way, the whole world will be happy once again. And please publish this in front-page news headlines so more people will purchase financial products. Past performance does not guarantee future performance–check with your banker to see how we fit you into a new “global economic recovery structured note (GERN)” that will target recovering economies.

And what then, for people hoping the economic recovery will bring about more employment opportunities? Well, more or less the response will be thus: Employment? Oh, don’t worry, because we have already said the economy will recover, you will find a job– I can’t gurantee what job, but you will have one. And oh, please go and invest in GERN– do your part, stimulate the economy. Past performance does not guarantee future performance, LISTEN to your banker…oh, you’re unemployed and can’t afford? Who cares then! I’m not a freaking charity, am I??

In Economics 101, we were taught that while GDP growth is a function of Consumer Expenditure, Investment, Government Spending and Net Exports, Consumer Expenditure takes up the large gist of the pie accounting for more than 70% in some economies. If you asked me, we’re better off having more Great Singapore Sales or putting up with more roadworks in Singapore to stimulate the economy than to count on the US, European and Japanese consumers buying made-in-Singapore products, or trying to get more people invested in pseudo-Ponzi schemes.

And here’s the thing: no job, no income, where got money to spend??