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Just last week, the Central Bureau of Statistics published an optimistic figure that grabbed front-page headlines in all the papers: The economy grew by 2.5 percent during the first quarter.

Some people immediately began celebrating the end of the recession. Benjamin Netanyahu just has to start talking about an economic program and growth is already on the way. What a magician!

A careful analysis of the data, however, revealed that most of the "growth" stemmed from a sharp increase in government spending, ranging from debt repayment to temporary workers hired to help with the elections. This, of course, is not genuine or sustainable growth, and the CBS ought to find a better way of measuring this figure.

Yesterday, the unemployment figures confirmed that the situation is, indeed, worse than we thought. We have still not reached the all-time record set in 1992, when unemployment hit 11.2 percent, but then the jobless rate was largely due to mass immigration from the former Soviet Union, which reached the astounding pace of 200,000 immigrants a year (compared to 30,000 today). It takes time for such a large number of people to be absorbed into the work force.

Today's unemployment is thus worse than that of 1992 - because there is no light at the end of the tunnel. There is no peace process, such as that which began in September 1993, which sparked annual growth of 7 percent and reduced unemployment to an historic low of 6.6 percent in 1996. Today's unemployed have nothing to hope for.

And the economic ministries are predicting that the number of jobless will cross the 300,000 mark by the end of the year. This is more than 11.2 percent of the work force, and would thus definitively break 1992's dubious record.

Yesterday's data should also prompt an internal inquiry by the CBS. Its data for both January and February showed that unemployment was holding steady at 10.3 percent. So how did it suddenly jump to 10.8 percent for the quarter as a whole?

One person who did not get excited by last week's growth figures was Netanyahu himself - because even if there had been sustainable growth in the first quarter, the credit would have belonged to his political rival and predecessor as finance minister, Silvan Shalom. And that is the last thing Netanyahu needs.

In internal Finance Ministry discussions, Netanyahu has been saying that there are two ways to spark growth. One is by "compressing the spring" - after which, when the spring is released, the economy will surge forward and unemployment will fall. "Releasing the spring is all the things I have done and plan to do in the context of the economic program," he says. The other is by "compressing terror" - if there is some kind of agreement with the Palestinians, growth will be faster.

Netanyahu believes that growth from "compressing the spring" will begin in the first quarter of 2004, at which point unemployment will start to fall. But he is underestimating the effect of terrorism and the war in the territories on growth and employment.

In order to open a new factory, shopping mall, production line or any other kind of business, you need an entrepreneur who believes the future will be better: that the locals will start buying more and the tourists will return. But when terrorism is on the rise, tourists will not come, investors will not move their money here and we Israelis will continue to sit at home - which means the economy will not grow and unemployment will not decline, since the "terror effect" is stronger than the effect of "releasing the spring."

It is also worth remembering that some 100,000 people are currently working as security guards - a whopping 3.8 percent of the work force. Thus, if by some miracle we did reach a cease-fire with the Palestinians and the terror did stop, tens of thousands of guards would be fired and unemployment would soar. In time, an end to terrorism would spur growth, eventually enabling these guards to find better jobs. But initially, until this happens, the number of jobless would rise.