The Parallax Brief

Icon

Unrepentant Subjectivity on Economics, Politics, Defence, Foreign Policy, and Russia

Tempting Fate in Bad Times

No sooner had the Parallax Brief crafted an article about the paradox of thrift and its effects on Moscow, than Bloomberg illustrates the point by publishing yet another set of wrist-slashingly depressing figures for the Russian economy:

“Russia’s unemployment rate rose to 8.1 percent in January, the highest since March 2005, as collapsing demand and frozen credit markets forced businesses to cut staff.

The total number of unemployed rose by 300,000 in the month to 6.1 million people, or 8.1 percent of the working population, the Moscow-based Federal Statistics Service said in an e-mailed statement today. That was lower than the median forecast of 9 economists surveyed by Bloomberg for 8.2 percent.”

So if dropping demand and the evaporation of credit availability are leading to job losses, what affect do the job losses have? Why, they square the vicious circle, of course. According to another article on Bloomberg today, rising unemployment is having exactly the affect the paradox of thrift tells us it should:

“Russian retail sales grew at the slowest pace in more than nine years in January as the country faced its first recession in a decade because of falling commodity prices and the credit crisis.

Sales increased an annual 2.4 percent, the lowest growth rate since November 1999, down from 4.8 percent in December, the Federal Statistics Service said in an e-mailed statement today.”

Of course, the good news is that the figures exceeded the predictions of most economists, who had anticipated effectively flat growth, although how long this will last is anyone’s guess.

The Parallax Brief isn’t really so pleased that his gloomy prognoses are being backed by fresh evidence, but one thing is clear: whether you want to call it the vicious cycle or the paradox of thrift, it’s working in Russia in the same way it is working everywhere else, and it’s going to hurt.

Advertisements

Filed under: Economics, Russia, , , , , , ,

2 Responses

  1. Robertmf says:

    The economic symptoms indicate “deflation”. Is the correct word to use “deflation” instead of “recession” ? Are deflation and recession mutually exclusive … or is it possible to have deflation while in inflation.

  2. parallaxbrief says:

    Deflation is a term that relates to prices, recession relates to economic output. It’s possible to have inflation and recession, and, I suppose deflation and economic growth, although deflation tends to be disastrous for economies because it increases the real burden of debt and by systemically bringing prices down gives people economic incentives to put off purchases and consume far less.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: