Summary Background

LABOR FORCE

Manufacturing Jobs Lost Since 1996

86,000

In Puerto Rico

Unemployment Rate

8.3%

Southern Puerto Rico EDD

Labor Force Participation Rate

82.5%

Southern Puerto Rico EDD

Percent College Educated

25.4%

Southern Puerto Rico EDD

The prolonged recession, compounded by Hurricanes Irma and Maria, earthquakes, and COVID-19 has led to significant job losses for Puerto Rico and the SPREDD region. Since 2006, Puerto Rico has lost nearly 239,000 jobs, or 22% of its employment base.9

As shown in Chart 3 below, Puerto Rico has lost 86,000 manufacturing jobs since legislation to phase out section 936 was signed into law in 1996. (Because of BLS data restrictions that may identify information about specific firms, historical data on the manufacturing base of SPREDD’s region is not available.)

It is encouraging to note that manufacturing employment in Puerto Rico, as well as the region, has increased slightly since 2017. The increase in manufacturing jobs also coincides with the passage of the Tax Cuts and Jobs Act (TCJA) in late 2017, which among other things made it more difficult for U.S. companies to benefit from very low foreign income tax rates. Even though Puerto Rico is part of the U.S. economic system, it remains a foreign jurisdiction for U.S. income taxes, which some view as a competitive strength. Although many feared the impact TCJA would have on Puerto Rico, even referring to the legislation as “the Third Hurricane,” manufacturing jobs have increased since its passage and now exceed pre–Hurricane Maria levels.

The rapid transition of the SPREDD region from its agricultural base was also cited as a cause for some of the region’s issues by stakeholders. One stakeholder commented “It is the poorest area of the country. Large economic projects based on petrochemicals were developed in the 1960s. When these failed, the population of the area was greatly impoverished and there has not been a regional project that can replace it.” The closure of this economic activity in the early 1980s represented the loss of approximately 2,700 jobs.

The rapid transition of the SPREDD region from its agricultural base was also cited as a cause for some of the region’s issues by stakeholders. One stakeholder commented “It is the poorest area of the country. Large economic projects based on petrochemicals were developed in the 1960s. When these failed, the population of the area was greatly impoverished and there has not been a regional project that can replace it.” The closure of this economic activity in the early 1980s represented the loss of approximately 2,700 jobs.

With respect to total jobs, the SPREDD region has fared similarly since 2006, losing nearly 18,000 jobs, or 22% of its employment base, as outlined in Chart 4 below. Puerto Rico and SPREDD have both lost nearly 9% of jobs from the end of 2019 to the Third Quarter of 2020; indicating the economic impacts of COVID-19 appear to be worse than the economic setbacks caused by Hurricanes Irma and Maria. (See Chart 5 below).

See current employment in the region by municipality summarized below in Table 2.

Table 2: Establishments, Employees and Wages by Municipality. Source: U.S. Bureau of Labor Statistics QCEW Q3 2020

Chart 3: Manufacturing Jobs in Puerto Rico since legislation to end section 936 of the IRC was enacted in 1996. Source: U.S. Bureau of Labor Statistics

Chart 4: Job losses in SPREDD since the start of the recession. Source: U.S. Bureau of Labor Statistics

Chart 5: Changes in employment since start of recession in 2006. Source: U.S. Bureau of Labor Statistics