At the end of this month, the Economic Development Bank of Puerto Rico (EDB), will publish March’s Economic Activity Index (EAI) of the island. This release comes, after the last report shows a stagnant economy, due to the delay hurricane relief funds. Economist are not only going to be taking in consideration what the report will say, but they will be very attentive to what Governor Ricardo Rosselló will tell today at noon, when he delivers a message regarding the economic situation of the island. Here are five things to keep in mind for the next number.
Disaster Relief Funds:
It’s been 19 months, since hurricanes Irma and María struck the island. All damages caused by the hurricanes were calculated in $90 billions. As of today, only 20% of the hurricane relief funds have been injected into the island’s economy. Although Puerto Ricans are relying on these aids to move the economy, there is a discussion whether the funds will have an impact on the long run in the economy. Economist Iyari Ríos describes these funds as an oxygen tank that will help Puerto Rico escape the critical condition, but it won’t necessary solve the island’s whole economy. “Our economy is dying”, said Ríos, “these funds will give us a breath, but once the oxygen ends the question is what’s going to happen.”
Since 2010, the population in Puerto Rico has been declining at an alarming rate. More than half a million people in Puerto Rico have left the island in the last decade. The reduction of Puerto Ricans has affected many sectors, including the economy. Before the hurricane, migration was a big problem. After the storm, it became a bigger issue. While Puerto Rico’s economy continues to be depressed, Puerto Ricans keep flying out the island in the look out of better opportunities. This is one of the reasons why the index hasn’t been able to rebound.
The island’s unemployment rate is declining for the wrong reason. The workforce is declining. The exodusof young educated Puerto Ricans is occurring due to lack of stable jobs. A poll created by the Department of Labor and Human Resources of Puerto Rico, says that full-time jobs are being lost, while part-time employment is increasing. Because of this, the work force is taking actions and leaving Puerto Rico and entering the labor market in U.S. states.
Although the federal minimum wage ($7.25) also applies in Puerto Rico, economist watch carefully this number, because this has an impact on migration. “If you want increase labor participation you need to give better incentives”, added Ríos. In the island there has been a debate of whether the minimum wage should be reduced to $4.25. Economists have expressed that if this measure is approved, it could represent a bigger exodus of Puerto Ricans, worsening the economic activity.
This indicator is seen as one that represents development in the island. Right after the hurricane, there was an increase of cement sales, due to those immediate funds that arrived. Once these funds ceased, the indicator registered a decline. Economist expect that once the hurricane aids arrive, the indicator might have positive outcome. “We have to keep on eye on this number”, said economist Heriberto Martínez, “it should start showing a recovery”.