US embassy cable - 05KINGSTON1137

UNCLAS KINGSTON 001137 
 
SIPDIS 
 
STATE FOR WHA/CAR (BENT), EB/TRD (MATTINGLEY) 
 
E.O. 12958: N/A 
TAGS: ECON, JM 
SUBJECT: JAMAICAN ECONOMY - FIRST QUARTER 2005 - CONFIDENCE 
IS HIGH 
 
 
1. The Jamaica Chamber of Commerce, in conjunction with USAID 
and the Survey Research Center at the University of Michigan, 
has been conducting surveys of both business and consumer 
confidence levels in Jamaica since 2001.  Professor Richard 
Curtin of the University of Michigan announced his findings 
for the First Quarter of 2005 on April 5.  His primary 
finding was that business confidence was at the highest 
recorded level in the history of the survey, and that 
consumer confidence, while down slightly from the Fourth 
Quarter of 2004, was still much higher than the First Quarter 
of 2004.  Though Curtin cautioned that the study could not 
account for unforeseen economic shocks, such as spiraling gas 
prices, labor troubles, inflation, or interest rate 
increases, he concluded that both businesses and consumers 
expect Jamaica's economic recovery to continue through 2005. 
 
2. Curtin reported that the surge in business confidence is 
broad based, with 28 percent reporting greater than expected 
profits and 65 percent planning to invest in expansion in the 
coming year.  Based on the announcement of new investments in 
tourism and mining, the expectation of a stabilization in the 
Jamaican dollar, as well as the completion of a new 
Memorandum of Understanding between the GOJ and leading labor 
unions, 35 percent of businesses expect better economic 
conditions in the year ahead.  Of those businesses 
maintaining negative outlooks, nine in ten firms identified 
crime as the number one problem restricting growth. 
 
3.  Curtin stated that there had been a small pullback in 
consumer confidence, due to conflicting signals in current 
economic conditions.  Consumers in Kingston and those 
involved in the tourism industry have maintained high 
confidence levels, but consumers outside of Kingston in other 
industries have lost confidence.  Curtin identified 
unemployment as the primary cause of the confidence loss, 
stating that Jamaica's economic recovery to this point had 
largely been jobless - increasing income in exchange for 
increased productivity without creating many new employment 
opportunities.  Curtin stated that the cause of this 
unemployment problem was a lack of skills and training among 
the unemployed, leaving them capable of competing for only 
menial, unskilled employment, while jobs requiring 
professional skills go unfilled.  As a result of high 
unemployment, 45 percent of the consumers surveyed expected 
the economy to worsen, up from 39 percent in the Fourth 
Quarter of 2004.  This uncertainty has caused consumers to be 
cautious in developing their spending plans, even though they 
tentatively expect higher income levels. 
 
4. Comment.  The responses from businesses indicate that the 
country's economic structure and investment climate are, if 
not perfect, at least better than at any time since the 
surveys began in 2001, and Jamaican entrepreneurs appear to 
have confidence in the moves their government has made to 
attract investment and head off industrial actions by labor. 
The consumer figures, however, appear to indicate a 
developing problem in demographics.  Those Jamaicans with 
skills in high demand are emigrating to the UK, Canada and 
the U.S. in large numbers, and supporting their families with 
remittances.  This increases the percentage of the unskilled 
and unemployable remaining in the country.  In the immediate 
sense, this is a problem for consumer confidence, since the 
island's unemployed, with no marketable skills, often see no 
chance of ever getting a job.  In the long term, however, the 
limited size of the skilled labor pool in Jamaica may 
seriously limit the ability of the business sector to grow. 
End Comment. 
TIGHE