The IMF Might Just Be In Denial

While economists from the International Monetary Fund speculate that the worst of the global recession is over and that the recovery has begun, the U.S. Department of Commerce revealed that the U.S. lost 467,000 jobs in June.

Unemployment is on the rise. That is a fact. In May, 322,000 American citizens lost their jobs, and, in the first 6 months of 2009, unemployment rose to nearly 3.4 million. (In comparison, in 2008, only approximately 3.1 million jobs were lost.) A national unemployment rate of 9.5 percent ranks June, 2009, as the single worst month for layoffs in the last 26 years.

But the bad news doesn’t stop there. Looking at the figures more closely, one can see that, although 90.5 percent of the North American population is employed, their weekly work hours have fallen from the regular 40 hours per week to 33 hours. Furthermore, the overall rate of unemployment has reached a staggering percentage of 16.5 percent unemployed and looking for work.

But what does this mean for our Salvadorian compatriots living in the States?

It is common knowledge that Salvadorians tend to work in the service sector, primarily in the hotel and restaurant industries. We also know that the North American population is not spending the same way that it did in the past. In fact, the rate of savings in the U.S. has increased, and, given the fragile economy, North Americans are spending significantly less on both luxury and essential items.

The restaurants that employ the majority of Latin Americans living and working in the U.S. are prime examples of this change. Ten months ago, when you went to a restaurant like Sizzler or Macaroni Grill, you had to wait an hour and a half to be seated and traffic didn’t seem to let up until late in the evening. Not so long ago, that was a typical Friday night.

Now, there is hardly a wait at all and many restaurants are empty, even on weekend nights. They can no longer afford to employ as many people for as many hours a night, a fact that has put tremendous strain on the Salvadorian and Latin American economies — many families rely on remittances from the U.S. and other developed countries to make ends meet, even in a good economy.

Despite what the IMF says about the global financial crisis winding down, it would be premature to say that the worst is over.

In fact, it’s unlikely one can say with any degree of certainty that the worst of the global crisis is anywhere near over. Consumerism, the attitude that made the U.S. economy the most dynamic in the world, is out and prudence is in.

At its most fundamental level, the change in spending habits indicates the drastic change in wages. Without good wages and a strong U.S. economy, countries like China, who rely on American consumers as their number one market, will also have a hard time bouncing back from the reality the IMF is unwilling to face.