Economics Assignment Macroeconomics Analysis of the PIGS: Portugal Employment/Unemployment Labour productivity.

. Recent economic fultuations during the crisis had lead to a an increase in unemployment in Portugal. During the late 90s the country had a considerable decrease in unemployment (from 6% in January 1998 to almost less than 4% by the beginning of 2001. By 2003 the level of unemployment increased subtantially during the next 4 years and reached its maximum point during the economic crisis from 2008 to present days with more than 12% unemployment of the labor force in the country.

According to the European Industrial Observatory on-line: Unemployment increased sharply in Portugal during 2002 and the early months of 2003. Trade unions attribute much of the rise to economic effects of the government's policy of controlling public debt and expenditure () . By stablishing this policies, unemployment can be attribute to the governments decisin of reducing public dficit which is going to be determined by a considerable reduction in public expenditure. By stablishing this policy the government reduces its expenses in providing goods ans services for the market which leads to an increase in unemployment due to the fact that this market became narrower. Less services and goods for selling caused by the reduction of government expenditure decreased opportunity for population to get involve in the market. At the same time a decrease in infrastructure investment cause the same effect on workers based on a lack in jobs within the construction sector. ()manufacturing employment fell by 4.4% in 2002, the most affected sector being machine manufacturing (down 23.1%), with employment in overall capital goods production also dropping (down 5.5%). Employment fell 0.9% in the service sector()1 Further on, the financial crisis of 2008 increased unemployment making Portugal one of the leading countries in the european zone. Bancs in Portugal affected or threathened by the crisis reduced credits from corporations, causing
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European Industrial Observatory on-line. http://www.eurofound.europa.eu/eiro/2003/04/inbrief/pt0304101n.htm

a decrase, if not a complete one, of inventory and machinery purchased and a lack of investments resulting in a reduction of production and imports and therefore a supression of jobs. As for the labour productivity the unemployment rate had a direct effect on the industrial productivity of Portugal. The graph bellow represent the percentage of industrial production as for the last decade.

During the financial crisis in 2008 a substiantial decrase in industrial productivity impacted on Portugals economy. As companies suffered from a decrease in loans for investments they had to cope with high interest rate and inflation therefore wages lost value. Also personnel was fired. All these reactions resulted in high decrease of labour productivity mainly caused by unemployment and a direct reduction in corporate investments for domestic production. The following graph represent Greeces industrial production from 2000-2011. Labour production had suffer greater impacts from the financial crisis in 2008.

While Portugals lowest point in the percentage of industrial production was -15% with a considerable growth from the beginning of the crisis in 2008 until 2011, Greece suffered a constant decrease of almost -14 during the financial crisis until present days. This can be attribute to two characteristic. In the first place Portugal has lower levels of public dficit and debt than greece does. Also, Portugal has higher credibility in terms of reducing government deficits and debt accumulation while there are still doubts over the credibility of Greeces accounts. Sources: http://www.tradingeconomics.com/greece/industrial-production http://www.eurofound.europa.eu/eiro/2003/04/inbrief/pt0304101n.htm http://www.oecd.org/document/46/0,3746,en_2649_33927_40401454_1_ 1_1_1,00.html#press_material http://www.periodistas-es.org/economia/crisis-economica-en-portugalrescate-financiero-con-medidas-draconianas