“The economy, stupid” was the simple phrase coined by political strategist James Carville to remind workers on Bill Clinton’s successful 1992 US presidential campaign of what was the key issue.It could just as well be applied as a brusque answer to anyone asking about the top issue for Bermudian voters going to the polls on Monday.The Island’s economy shrunk for three consecutive years from 2009 to 2011, according to official gross domestic product (GDP) statistics and this year will probably turn out to be a fourth year of recession, in line with Ministry of Finance forecasts.While the ruling Progressive Labour Party (PLP) insists that the recession is entirely a result of the global economic malaise, the opposition One Bermuda Alliance (OBA) is adamant that Government policies have played a major role in exacerbating the recession.Whatever the reasons for the downturn, the impact on the community has been powerful and broad. Hundreds have lost their jobs and pay freezes or cuts have become a regular feature of the labour market.It has disproportionately hit those at the lower end of the income scale, as well as young people and seniors. More people have been struggling to pay for the basic necessities in life, including food and electricity, putting a strain on government social services and charities.Coming after nearly two decades of uninterrupted growth, the lingering recession has come as a shock to Bermuda.UnemploymentThe end of a construction boom, four successive years of attritional job losses in the international business sector, as well as downsizing and closures among local businesses, have led to an increasing unemployment problem.The Island’s official unemployment rate is eight percent, double what it was in 2009. Ten percent of Bermudians are out of work and 10,000 residents — or more than a quarter of the workforce — are described as either unemployed or underemployed, according to the Labour Force Survey Executive Report, released in October.The unemployment problem is hitting younger people the hardest. More than a third of 16- to 24-year-olds were looking for work in May this year when the survey was carried out, something that may help to explain the perceived apathy among first-time voters.Even among those with jobs, one in five were reported to be “underemployed”. This was reflected by the sharp fall in the average working week to 38 hours this year compared to 42 hours in 2010.Private debtWhile the burgeoning Government net debt of around $1.4 billion is often discussed as a feature of these tough times, it is dwarfed by the amount of private debt in the community, which tops $5 billion. Much of that is in the form of mortgages. When employment income declines or disappears and overseas worker tenants go home, the mortgage still has to be paid in many cases on a home that has lost value during the recession.“It is worth noting that just prior to the recession the Island had never been richer, as measured by gross domestic product (GDP), the value of all incomes earned,” economist Craig Simmons said. “Households and businesses were also overloaded with debt. This was largely possible because of unprecedented levels of debt-fuelled private and public spending.“Because of its size (over $5 billion) and composition, private debt is a bigger problem than public debt; over a billion dollars is denominated in foreign currency.“An ‘excessive and uncontrolled expansion of credit’ threatens the stability of the entire economy. Hopefully the lesson has been learned: debt is dangerous and leverage is lethal.”Borrowers’ struggles to meet their obligations are evident in quarterly bank statistics published by financial regulator the Bermuda Monetary Authority (BMA).Non-performing loans, classed by the regulator as those where repayments are 90 days or more behind, made up 8.1 percent of banks’ total loans in the second quarter. What was even more alarming was the spike in provisions to non-performing loans, which rocketed to 26 percent from 16 percent in the previous quarter, in a sign of banks’ preparations to write off increasing amounts of bad debt.Net charge-offs for bad debt totalled nearly $74 million during the second quarter, a more than quadrupling from the $12.8 million the previous quarter.International businessIt’s hard to overestimate the economic impact of international business. It provides hundreds of well-paid jobs and pumps more than $1 billion into the economy. The $1.03 billion of employment income generated by the international business sector in 2011 made up about a third of total employment income on the Island.The sector helps to support jobs and businesses in other sectors, like business and financial services, restaurants and hotels, retailers and realtors. But for the past four years, the total contribution of international business to the economy has been declining.One of the reasons for that is the changing economics of the Island’s world-leading insurance industry, since the financial crisis. The flow of investment returns that once bolstered the profits of insurers has slowed to a trickle during a prolonged period of ultra-low interest rates. At the same time, insurance rates have not risen sufficiently to compensate.Single-digit returns on equity are not pleasing investors who have become accustomed to much better. In the absence of meaningful growth, as Third Point Re CEO John Berger said this week, managers are focusing on expenses management. This, he believes, will lead to most functions other than underwriting leaving Bermuda.It’s a trend that has been happening for several years. The Association of Bermuda Insurers and Reinsurers (ABIR) said in its economic impact report that 2011 was the fourth successive year that its members had reduced their Bermuda payrolls. It’s important to note that this was not just a case of expatriate workers leaving the Island — more than two-thirds of ABIR members’ employees are Bermudians.One of the key challenges for the winners of next week’s election will be to try to reverse that job loss trend.The OBA has proposed suspending work permit time limits that company bosses have long insisted jeopardise their ability to recruit and retain the best talent, whose presence can help them to build up their businesses here.The PLP Government has been carrying out a months-long review of work permit policies and intends to reveal the results in the New Year.Retail salesRetailers have seen their takings at the till slide dramatically over the past few years. Retail sales in September 2007 totalled $97.5 million, according to the final monthly Retail Sales Index report before the last general election. In September this year gross receipts totalled $82.5 million — a fall of $15 million or 15.4 percent over the past five years.Unemployment and job insecurity have played their part, as has a declining population with the departure of hundreds of expatriate workers. Adding to the challenge for retailers, a sector that provides more than 3,000 jobs, has been a change in the way that people shop, as online shopping from overseas retailers become easier to do. Many US retailers are now shipping direct to Bermuda now, a development highlighted in a story in yesterday’s Business section.