A fragile economy

Thu, Jun 7th 2012, 08:28 AM

Local economists and analysts must be watching with a very wary eye the most recent jobs reports coming out of the United States.
Last week, the latest jobs numbers -- for the month of May -- were released. The news was worrisome. The U.S. economy added only 69,000 jobs for that month, compared to 77,000-plus in April and 143,000-plus in March.
America's recovery from now what is widely referred to as the 'Great Recession' is sputtering at best.
This is bad news for The Bahamas. Weak performance in the U.S. economy translates into weak performance in The Bahamas' major economic pillar -- tourism.
The close inter-relationship between the U.S. and Bahamian economies is nothing new and the impact of any movement in U.S. labor markets is almost instantly transmitted to our tourist industry.
American visitors to The Bahamas tend to travel more frequently when they are confident about their future well being and when they have surplus funds or more disposable income at their command.
As the U.S. economy slowly emerges from the devastating global recession, any news regarding a slow down in job growth in the U.S. not only shakes the confidence of the U.S. consumer, it could also lead to immediate adjustments in household budgets resulting in cut-backs in unnecessary discretionary spending, or more precisely, tourist travel to places such as The Bahamas.
For the past three years or more the Ministry of Tourism together with local tourists associations have been desperately trying to increase visitor numbers to The Bahamas via various promotion and advertising strategies including subsidizing "companion-free" flights to The Bahamas. More recently, the mega-resort Atlantis, once known for its robust occupancy, has severely slashed its rates to attract badly-needed visitors.
While there has been some success, we are not out of the woods yet and any disturbances in the U.S. labor markets which would dampen or restrain our efforts is, to say the least, most unwelcomed.
Some analysts predict that the economic turmoil in Europe could push the U.S. and most of the rest of the world into another big recession. If that is the case, Bahamians should brace themselves for the fact that these tough economic times are not going anywhere soon. And act accordingly.
In the face of the dismal jobs reports, we are dealing with our own set of economic challenges. The country's deficit for the 2011/2012 fiscal year rose to a record $570 million -- an increase of $256 million or 82 percent more than the $314 million that was originally anticipated. The government now has to borrow $504 million to cover this deficit. This means that the national debt will increase to $4.8 billion by the end of the next fiscal year. And a projected $5.4 billion by 2014.
These continue to be extraordinary economic times that require bold, creative and extraordinary measures from policy makers.
We are hopeful, for our collective sakes, that the recent downturn in the U.S. job numbers are an aberration and not the beginning of a long negative trend which could render further harm to our increasingly fragile economy.

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