Top Economist Can’t Explain Low Israeli Unemployment

Leo Leiderman, a former candidate to lead the Bank of Israel, questions the jobless figures and calls for increased transparency.

No one can explain why Israel’s unemployment rate is so low, economist Leo Leiderman said Wednesday.

Leiderman, chief economist at Bank Hapoalim, had been one of Prime Minister Benjamin Netanyahu’s choices for Bank of Israel governor, until he withdrew his candidacy.

“I don’t know a macroeconomist in Israel, including at the Bank of Israel, who can explain how, despite all the newspaper headlines and all the layoffs, the unemployment rate is still only 5.7%,” Leiderman told a conference sponsored by the Israel Institute of Energy and Environment.

He noted that unemployment in the United States is 7%, while the average in the euro zone is 12%, and questioned Israel’s relative stability and low jobless rate.

“It’s known that there was a change in the methodology, and we’ll keep looking into that. I’m not questioning the method, but there is a question – is this the statistic that I should be using to learn about Israel’s economy and employment?”

The number of jobs grew by 0.4% in 2013, but that was a result of the 2.2% increase in the number of public sector jobs, Leiderman said, while private-sector jobs contracted by 0.3%.

“Sustainable growth comes from the private sector, not by making the government bigger,” he said. “It’s hard to believe that given the headlines, we’ll continue seeing such unemployment figures. Currently, the forecast for 2014 includes a slight increase in unemployment, to 6%.”

Leiderman also had harsh criticism for the lack of transparency in the national budget.

“The statistics presented by the Finance Ministry, the way the budget is managed and the oversight are lacking in everything that has to do with transparency. In Israel today, the business sector works professionally and transparently, and it’s untenable that a modern country like Israel would continue functioning at a level of transparency that suits less developed nations,” he said.

Leiderman also addressed the shekel exchange rate. The shekel appreciated 7.3% against the dollar in 2013, to the chagrin of exporters. Leiderman said he expected the dollar exchange rate to remain at around 3.45 to 3.50 shekels this year, and said the main reason the shekel had strengthened was an influx of medium- to long-term investments.

Instead of trying to set a bottom limit for the exchange rate, the government would do well to provide financial assistance to exporters, he said. Setting limits is doomed to failure, he added.

Liederman also said that the increased use of Israel’s own natural gas will likely reduce living costs in Israel.

Ofer Vaknin