LABOR TURNOVER in the country’s large firms steadied in the fourth quarter compared to the previous quarter, according to the Philippine Statistics Authority (PSA).

Results from the PSA’s Labor Turnover Survey showed the labor turnover rate, which is the difference between rates of accession and separation in firms, settling at 0.8% in the last three months of 2018.

This means that for every 1,000 persons employed, large firms hired eight workers on a net basis in the fourth quarter.

The fourth-quarter labor turnover reading was unchanged from the third quarter result.

However, it is worth noting that this was an upward revision from the preliminary 0.6% turnover rate estimated in May.

“Labor turnover may be the same in the fourth quarter of 2018 at 0.8% [compared to the third quarter], but we have seen a slowdown in both accession rate and separation rate… as inflation rate reached a near decade-high of 6.7% in September 2018 and October 2018…” Rizal Commercial Banking Corp. economist Michael L. Ricafort said in a mobile phone message, adding that local interest rates “similarly reached their decade-highs in October 2018.”

Last year saw inflation accelerating for nine straight months, peaking at a nine-year-high 6.7% in September and October before decelerating to six percent in November and 5.1% in December. This brought the full-year 2018 average to a decade-high 5.2% against the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range for 2018.

To quell inflation, the BSP hiked interest rates by a cumulative 175 basis points (bp) in five consecutive meetings in 2018. It was only in its May 9 meeting this year that the central bank took the first step in monetary policy normalization by partially dialing back benchmark rates by 25 bp. A week later, it announced a series of cuts in the reserve requirement ratios imposed on banks — the first of which took effect last Friday.

The rate of accession — which represents hiring by employers to either replace former employees or expand their workforce — was recorded at eight percent in the fourth quarter, slipping from the 9.5% in the preceding three months.

The rate of separation — involving termination and resignation — stood at 7.2%, also down from 8.7% in the preceding quarter.

Breaking down the accession rate, more people were hired in the fourth quarter due to business expansion at 4.1% compared to those who were employed as replacement for former employees at 3.9%.

The employee-initiated (resignations) separation rate stood at four percent while employer-initiated (retrenchment) separation rate was 3.3%.

The agriculture, forestry and fishing sector had an accession rate of 6.1% versus a 4.8% separation rate, resulting in a labor turnover rate of 1.3%.

Services had an 8.5% accession rate and a 6.6% separation rate, yielding a net job creation rate of 1.9%. With the exception of professional, scientific, and technical activities (-0.9%), all other service subsectors recorded net positive turnover rates.

On the other hand, industry posted a negative labor turnover rate with a separation rate of 9.5% versus the accession rate of 6.6%. Pulling down the sector were negative turnover rates in construction (-6.4%); mining and quarrying (-4%); and manufacturing (-2.5%).

Mr. Ricafort said that the net positive turnover in agriculture “may reflect replanting/recovery in agriculture production” in the fourth quarter following damage caused by Typhoon Ompong in September 2018.

The economist attributed industry’s net job loss to “adverse effects of the lingering US-China trade war… that may have slowed down demand for the country’s exports to China and the US.”

“Still, relatively higher interest rates and inflation rates in [the fourth quarter of 2018] (though already easing) may have kept manufacturers on a wait-and-see attitude while waiting for both inflation and interest rates to go down further before making more aggressive borrowings/purchases for new production facilities and expansion projects…”

Mr. Ricafort further surmised that uncertainties related to the proposed rationalization of fiscal incentives “may have partly added” to the sector’s negative labor turnover in the fourth quarter.

For the first quarter of this year, conditions in the labor market are expected to have improved amid the easing inflation rate and government signals to loosen its monetary policy.

“Much lower interest rates encourage more borrowings/financing by consumers and businesses including manufacturers that lead to more production facilities and greater economic activities that may, in turn, help create more jobs and business opportunities. Thus, industry labor turnover (job creation) may improve in [the first quarter of 2019],” Mr. Ricafort said.

The same is expected for the agriculture sector which the economist attributed to “better weather conditions” in the first quarter 2019 even as these were partly offset by El Niño’s impact on agriculture production. — Kimani Eros S. Franco