Until today, the finance minister could say that while the economy was in bad shape, the fact that unemployment was stable showed that the crisis was not as profound as the prophets of doom claimed.
Today he can no longer say that. The Central Bureau of Statistics released figures yesterday showing that unemployment has jumped to 9.3 percent of the work force, meaning 234,500 people are out of work - and that is a threatening number, because everyone has to believe he might be next.
It is also threatening to the stability of the government, because if there are two statistics the public understands, they are unemployment and inflation. Inflation is under control, but unemployment over 10 percent could result in the public losing faith in the government and political pressures that could topple it.
But along with the rise in unemployment, the factory closings, the dismissals, the hardship, the low growth and the decline in exports, there is another figure that seems inexplicable - an 8 percent rise in personal consumption. People are buying more now than they did a year ago, before the utter collapse of the Nasdaq and the outbreak of the intifada.
There are a number of possible explanations. One is that the public is generally in no hurry to lower its standard of living during a crisis because it expects the crisis to be temporary. Thus instead, people cash in their savings to supplement their lowered income - and indeed, there has been a sharp drop in savings over the past few months. Saving accounts have been cashed in, or not renewed, and mutual funds have been sold. And with this money, people go shopping.
The fact that interest rates have dropped significantly contributes to this. Once upon a time, we could either invest in the bourse or obtain 10 percent interest on our money from the bank. Now the stock market is a nightmare and the banks are offering barely 5 percent.
The fact that the finance minister continues to say there will be 4 percent growth next year also contributes to the belief that next year, everything will be fine, so there is no need to tighten the belt now. And the government is not exactly behaving as if there were a crisis. Populist laws are not being repealed, and ministers continue to demand higher budgets.
A second reason is the increasing uncertainty about the future. Economists cannot predict the fate of the economy next year and the political-military situation is no less amorphous. And when an individual cannot predict whether his income will rise or fall in the coming year, there are two ways to go.
The first is to save, to prepare a reserve for the expected rainy day. That is what is happening in Japan. The Japanese government has increased expenditures and lowered interest rates, but it has not helped, because the Japanese are still suspicious of what the future holds. They therefore save more and cut their spending, so the Japanese markets do not get the push they need and Japan continues to wallow in recession.
The other possibility is the exact opposite: A person may say to himself that the future is so frightening that he may as well exploit the moment and live well now - for who knows what tomorrow holds? That is the Israeli way: When the horizon is cloudy, Israelis consume more. This explains the increase in private consumption despite the recession and the rising unemployment. The prophet Isaiah said it best in chapter 22, verse 13: "Let us eat and drink, for tomorrow we die."
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