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Job quality improves in October despite increased unemployment

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By Marissa Mae M. Ramos
Researcher

THE LATEST labor data in October bared a mixed picture as unemployment inched up, but the ranks of those wanting more work thinned.

The preliminary report of the October 2018 round of the labor force survey (LFS) conducted by the Philippine Statistics Authority (PSA) and released yesterday put the unemployment rate at 5.1%, equivalent to 2.2 million individuals, compared to five percent in the year-ago survey.

For the year, unemployment rate averaged 5.3%, which is at the upper end of the 4.7-5.3% target set for 2018 under the Philippine Development Plan 2017-2022.

At the same time, the quality of available jobs improved as the underemployment rate — the proportion of those already working but still looking for more work or longer working hours — decreased to 13.3% from 15.9% in the same comparative periods, equivalent to 5.502 million Filipinos, from 6.616 million a year ago.

“This is equivalent to 1.1 million less underemployed workers from last year’s 6.6 million. This is the lowest underemployment rate recorded for all October rounds since 2006 (20.3%),” the National Economic and Development Authority (NEDA) said in a statement. “This signals that the quality of work is improving even outside the National Capital Region (NCR). We attributed this to expanding employment opportunities and the approval of nominal increases in regional wages supported by labor productivity improvements,” Socioeconomic Planning Secretary Ernesto M. Pernia was quoted in the NEDA statement as saying.

Underemployment rate in areas outside NCR “significantly declined” to 14.6% in October 2018 from last year’s 17%, which is also the lowest in over a decade, NEDA’s statement further read.

Underemployment in the NCR improved to 4.8% in October 2018 versus last year’s 8.6%.

Furthermore, the percentage of “discouraged job seekers” declined to 11.5%, which is better than the 12% target for 2018.

“However, of the total youth population, 19.9% is neither in employment nor in education in 2018, but still falling within the PDP target of 19.5-21.5%,” noted NEDA.

The size of the labor force was approximately 43.563 million out of 71.886 million Filipinos at least 15 years old, yielding a participation rate of 60.6%, down from 62.1% a year ago.

NEDA also noted that around 826,000 new jobs were generated in 2018, less than the government’s annual target of 900,000-1.1 million.

“This slightly higher [unemployment] and lower labor participation may actually point to declines in both agriculture and services sectors,” said Ruben Carlo O. Asuncion, chief economist at the Union Bank of the Philippines, Inc. (UnionBank).

Employment share of agriculture and services fell to 24.1% (from 25%) and 56.8% (from 57%). On the other hand, industry saw its share of employment go up to 19.1% from 18% previously.

Much of the increased underemployment rate was seen in agriculture, with a 37.9% rate in October that was worse than last year’s 32.6%. Underemployment in industry and services improved to 18.8% and 43.2% from 19.5% and 47.9%, respectively.

Mr. Asuncion attributed the weakness of the agriculture sector to “weather disturbance, particularly in the last 10 months of year” as farm output reeled from typhoon.

The economist likewise surmised that inflation may have played a role in worsened unemployment. “It seems that the heightened inflation has caused some firms to let go of their employees for cost-cutting reasons,” Mr. Asuncion said, adding that this may have influenced firms to “hire less or simply freeze hiring plans.”

Michael L. Ricafort, economist at Rizal Commercial Banking Corp. (RCBC) shared this assessment. “The slight increase in unemployment rate may have reflected the slower Philippine economic growth of 6.1% in 3Q 2018, after higher inflation rates amid higher global oil prices, higher food prices, weaker peso, and higher taxes under the TRAIN Law,” he said, referring to Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion Act that took effect in January. “These could have resulted in lower corporate earnings and reduced the ability of companies to generate new jobs through new investments and expansion projects.”

Asked on the lower underemployment rate, both economists said that this could be an effect of the country’s improving economy.

“I think it is a simple case of a continuously growing economy where many full-time job opportunities result. Philippine economic growth this 2018, though lower than 2017, is still a very respectable expansion,” UnionBank’s Mr. Asuncion said.

For RCBC’s Mr. Ricafort, the underemployment estimate “may also reflect the government’s increased infrastructure spending and the continued growth in both real estate and construction.”

“The lowest underemployment rate since records started in the 1990s may be brought about by more job opportunities and greater demand for jobs with longer working hours, amid the continued growth in the services sector and the pickup in manufacturing/industry sector,” he added.

Moving forward, the economists perceive the employment situation in the country to improve in the months ahead.

For RCBC’s Mr. Ricafort: “The country’s employment data could continue to improve in the coming months in view of increased and faster deployment of the government’s infrastructure projects, continued growth in real estate and construction including related/allied industries and businesses, and continued expansion of the country’s biggest businesses/conglomerates especially in areas outside Metro Manila as source of growth.”

He also cited the “[r]ecord-high foreign direct investments in recent years” to make the country a “compelling investment destination” that will lead to even more gainful jobs.

For UnionBank’s Mr. Asuncion: “[W]ith inflation showing early signs of easing, employment will continue to grow and more opportunities will be available for labor that look for full-time jobs.”