Unemployment Ravages Putin’s Russia
In a stunning report from Reuters last weekend, we learned that “the number of unemployed Russians rose to 6 million in December compared to 5 million in November as an economic downturn hit home” according to the head of the Russian federal employment service, one Yuri Gertsiy, who was speaking on Echo of Moscow radio. That’s a startling increase in unemployment of 20% in just one month. The figure is four times higher than the number of Russians who have registered with the state as being unemployed six months into the national financial crisis, showing that such records are utterly meaningless in evaluating the nation’s employment rate.
At 6 million, Russia’s level of unemployment is 50% higher than it was just six months ago. Before the crisis began in August, Russia had 4 million workers unemployed, 5% of the total workforce. At the current rate, Russia will have 8 million people, or 10% of the workforce, unemployed by summer 2009 — and the 10% unemployed level is viewed by many economists as a critical threshold for social upheaval and governmental collapse.
Wages are also down dramatically, plummeting “an annual 4.6 percent in December to 17,112 rubles ($517.85), the first contraction since October 1999 when they fell 2.2 percent. Disposable income fell 11.6 percent, the biggest contraction since August 1999.” As a result retail spending is at its lowest level since 1999.
Russian economic growth has plummeted from 8% in 2007 to 6% last year, and is expected to reach -0.2% in 2009. The Kremlin’s budget, already massively undercut by falling crude oil prices, is now under serious pressure and the government is called upon to provide subsistence to vast numbers of unemployed workers or create make-work projects through investments. This means the budget moving rapidly into deficit spending.
And the Russian worker is caught in a vortex, since the falling value of the national currency is driving up the price of imported goods on which consumers depend even as many are losing jobs and others are seeing wages slashed.
This is Putinomics. In the past, the Russophile hoards have claimed that the Kremlin could use its allegedly massive surplus in foreign exchange to address economic problems of this kind. But with one-third of those reserves already squandered over the course of just six months as the Kremlin made a futile effort to inflate the value of the ruble and the stock market, we do not hear those wild-eyed claims much any more.