By Barry Davidson
Tuesday 6 October 2009
Jerusalem--The Bank of Israel (BOI)asserted in its report yesterday that Israeli wages and industrial production was down due to the Israeli recession.
According to the Bank of Israel (BOI), the current Israeli recession began in the last quarter 2008 and is in continuation. The BOI asserted that the U.S. recession began a year earlier.
This is second recession of the first decade of 2000. The first recession, according to the BOI, began at the end of 2000 and continued until the last quarter 2003.
The purpose of the BOI report was to compare the reaction of Israel's labor market during the 2000-3 recession and the current one.
The BOI asserted that wages and labor input declined during the current recession. This is because many Israeli companies anticipated the onset of the recession and lowered wages and industrial production accordingly.
The difference in how Israeli companies reacted is due mainly to the differences between the way that each of the recessions developed.
The BOI asserted that the current recession started gradually, following the International financial crisis.
The 2000-3 recession started after the outbreak of the second intifada in October 2000 and the bursting of the high-tech bubble.
The BOI stated wages and employment in those industries suffered even before the economy entered a really tangible recession. Because of the deterioration in the International financial situation.
In both cases, according to the BOI, the labor market in the business sector reacted by reducing wages and labor input. In the first recession, the nominal wage and labor input started to decline only three quarters after the start of the recession. In the latest recession they declined a quarter before the start of the recession, in the second quarter of 2008.
The BOI asserted that the labor market’s reaction during the two recessions acted differently.
The first started suddenly, with the outbreak of the El-Aqsa intifada, and became more severe with the onset of the global slowdown following the bursting of the high-tech bubble.
The BOI explained that the latest recession became apparent gradually, after a year of downturn in the GDP growth rate resulting from the global slowdown and the recession in the USA that began back in December 2007.
According to the Companies Survey, the business sector anticipated the beginning of the recession in Israel, and started making the necessary adjustments to wages and labor input in advance.
