In an economic downturn, there is an expression economists use to illustrate the difference between a depression and recession: A recession is when your neighbor loses his job, while a depression is when you lose your job.
This might be appropriate in gauging how well the local economy has rebounded after bottoming out, especially when economic indicators are sending mixed signals and a “jobless recovery” is looming.
Because of a low base last year, the Council for Economic Planning and Development (CEPD) rated the nation’s economic climate as “yellow-red” this month for the first time in 25 months, which suggests the domestic economy might soon overheat. The indicator jumped 11 points from last month to 37 — the highest in five-and-a-half years.
At the same time, the nation’s consumer confidence index edged up to a 20-month high as public sentiment toward equity investment showed strong signs of improvement.
This all seems to point to good news to come.
However, as of the end of last month, 645,000 workers were still out of a job, or an unemployment rate of 5.86 percent. This did not include part-time workers, whose job security is questionable.
Less encouraging is that in the near future, a mismatch in the nation’s supply and demand for workers could emerge, as CEPD chairman Tsai Hsun-hsiung (蔡勳雄) has warned.
The mismatch suggests two extremes: One is that the nation’s top-tier managerial talent may be insufficient or unfit to meet the demand for such employees, and the other is that there will be an excess of low-end jobs with a thinner paycheck for which local job seekers may be overqualified and which they will be reluctant to take up, according to Tsai.
His conclusion was that while the nation could still experience an economic recovery, it would be accompanied by a surging jobless rate: the so-called jobless recovery.
If unemployment keeps rising, how would it be possible to spur domestic consumption — which makes up a smaller chunk of the local economy than exports — to back up a solid recovery?
The employment mismatch sends an even louder warning to local workers, because the gap will most likely be filled by expatriate workers, especially from Hong Kong, China and Vietnam.
A growing jobless rate may be inevitable and understandable as the local economy migrates from a manufacturing-oriented system to a more service-based economy, but what has the government done to address the mismatch and worsening unemployment problem?
The government seems to have tied its hopes to closer ties with China, claiming that the inking of an economic accord with China would generate more jobs in Taiwan. However, the government has refrained from detailing what kind of job opportunities would be created.
Perhaps the best way of testing claims that the economy is heating up is to check if your job is secure and promises reasonable pay growth.