48 continual months of decline

FRIDAY, JANUARY 4: All academic and technical definitions say that recessions are shorter than depressions.

A recession can be as short as three consecutive quarters (nine months) of rising unemployment, falling sales, and generally slowing economic activity.
A depression lasts much longer. As well, lowered economic activity is more severe than in any recent or past recession.
Simply, a Depression is a Recession that lasts a long time.
Bermuda Facts indicating a depression. (All figures are as reported by the Department of Statistics [DoS] or Ministry of Finance in June 2012 or earlier).
From 2008 to now, Bermuda’s reported and recorded GDP has fallen.

• 2008 $6,109.9m
• 2009 $5,806.4m. Down 5% from 2008
• 2010 $5,757.1m. Down 0.8% from 2009 and down 5.8% from 2008
• 2011 $5,557.1m. Down 3.5% from 2010 and down 9.0% from 2008
• 2012 If GDP declined just 1.0% in 2012, then GDP will be down 10.0% from 2008.

Although the DoS has not yet reported GDP for 2012 (it won’t do that until mid-2013), all indications are that GDP continued declining in 2012.

Unemployment. DoS has reported that on-Island unemployment was 3% and 1,000 persons in 2008. 
In 2009, said to be 4.5%; in 2010, said to be 6.0%; in 2011, said to be 6.0%. In May 2012 reported as 8% with 3,305 persons identified as unemployed. So unemployment tripled (1,000 to 3,305) between 2008 and May 2012.
However, 1,821 Guest Workers had packed-n-gone by mid-2011. Allowing for so far unreported Guest Worker departures between August 2011 and May 2012; in May 2012, Bermuda’s true unemployment rate was at least 13% (3,305 + 2,125 = 5,430). This rate approaches levels of unemployment seen in the Caribbean, Spain, Greece.

Whether the May 2012 unemployment rate is taken as the DoS reported 8% or the more realistic 13%; in 2012 Bermuda suffered from exceptionally high unemployment. In the six months between June and December 2012, job losses continued and unemployment has gone past 13%.

An unemployment anecdote: Bermuda last experienced this level of real unemployment in the period October 1939 and April 1941.
This was between the start of WWll (when Tourism stopped dead!) and the arrival of the US Army and US Navy bases (when construction and housing and other services boomed.)

Retail sales

In October 2012, DoS reported Retail Sales had been falling since 2009.
Government Revenue – In a depression, Government’s real revenues do not rise. In Bermuda this has happened:

• 2008/09 $950.8m.
• 2009/10 $917.3m. Down $33.5m or -3.5% from 2008/09
• 2010/11 $996.7m. Up 8.7% from 2009/10 and up $45.9m or 4.8% from 2008/09 as a result of Payroll and other tax increases in this year.
• 2011/12 $870.0m. Down -12.7% from 2010/11 and down $80.8m or -8.5% from total revenue in 2008/09.
• 2012/13 Likely to be $885.0m and up 1.7% from 2011/12 but DOWN $65.8m and -6.9% from total revenue in 2008/09.

This shows an overall trend of decline – substantially so when inflation is factored in. Overall, unadjusted for inflation, in 2012/13, Government’s actual revenues are down 6.9% from 2008.
Adjusted for inflation, revenues are down about 18% from 2008/09.

Government Spending – Government spending can sometimes soften or end a recession or depression. Alternately, Government’s spending pattern can exacerbate a recession, helping turn it into a depression. Between 2009 and 2012, Government’s spending pattern has prolonged and deepened Bermuda’s recession.

Steadily rising Debt Service Cost [DSC] is the prime driver for this Government generated downwards economic pressure.

• 2008/09 $1,194.3m minus $27.7m DSC = $1,166.6m spent in Bermuda
• 2009/10 $1,126.4m minus $40.2m DSC = $1,086.2m spent in Bermuda
• 2010/11 $1,242.7m minus $84.6m DSC = $1,158.1m spent in Bermuda
• 2011/12 $1,137.4m minus $95.7m DSC = $1,041.7m spent in Bermuda
• 2012/13 $1,081.1m minus $115.8m DSC = $965.3m spent in Bermuda (This is $201m or 17% less than was spent in 2008/09. Down over 25% when adjusted for inflation.)

Other reported evidence (no adjustments for inflation): Stamp Duties reflect real estate sales. Revenue from Stamp Duty declined from $46.2 million in 2008/09 to $23.0 million in 2011/12 – in three years, a 50% decline in revenue from this source.
Reflecting reducing activity in the Construction Industry, revenues from Planning Fees and Searches declined from $1.65 million in 2008/09 to $0.937 million in 2011/12 – a 44% decline three years.

Until 2011, revenue from Wharfage was an absolute indicator of the level of imports. In 2008/09, it was $1.817 million and was $1.637m in 2010/11 – a 10% drop in just two years. Customs Duty revenue was $224.2 million in 2008/09 and $190.0 million in 2011/12 – 15% down in three years. All imports are down.

Payroll Tax receipts in 2008/09 were $356.5 million. In 2011/12, Payroll Tax rates were exactly the same as in 2008/09, but produced only $315.0 million revenue. Payroll Tax revenue was down 12% in three years, bringing in $51.5m less.

Fees from International Companies were $64.7 million in 2008/09 and $58.8 million in 2011/12 – down 9% in three years. This drop happened despite a general fee increase in 2009/10.

Total foreign currency earnings from Tourism and International Business were $2,557.5 million in 2008. They were $2,347.2 million in 2010 (the last year for which figures have been reported). Down 9% in two years. Estimated to be lower in 2011 and not improving in 2012.

National Workforce – 40,213 jobs filled in 2008. Fell to 37,399 in 2011. That’s 7% down in three years. This resulted in a reduction in Bermuda’s residential population with a consequential overall reduction in overall demand for retail, rental accommodation, utilities, food, and all other on-Island goods and services.

To conclude: Bermuda’s measured and reported economic decline runs from January 2009 to December 2012. That is 48 consecutive months — sixteen consecutive quarters — of decline. After forty-eight months, in December 2012, by all definitions and from all indicators, Bermuda is in an economic depression.

Bob’s job? Get us out! Start by delivering the bitter pills of truth about the true state of Bermuda’s national finances and Bermuda’s economy.