Lower unemployment rate not good enough

Last week, the Philippine Statistics Authority (PSA) announced that the Philippines’ unemployment rate fell to 10 percent in July from 17.7 percent in April, while underemployment rate dropped to 17.3 percent from 18.9 percent. Despite the quarter-on-quarter improvement, there is little reason to celebrate as the numbers are still far from satisfactory. To some degree, the improvement in July compared to the April unemployment rate was already expected. Many Filipinos temporarily lost their jobs in April because of the enhanced community quarantine which forced many businesses to temporarily close.

However, an unemployment rate of 10 percent is still very high compared to historical average. Since the PSA adopted the new unemployment definition in 2005, the unemployment rate never exceeded 9 percent until this year. A lot of the jobs were lost in the arts, entertainment and recreation sector (down 82 percent) and the accommodation and food services sector (down 58.9 percent). Moreover, many of those who returned to work in July are not working full time. Although underemployment rate improved to 17.3 percent in July from 18.9 percent in April, the number of underemployed Filipinos rose from 6.4 million in April to 7.1 million in July. A higher underemployment rate was also reported by six of the 17 regions monitored by the PSA in the same period, which together accounted for 38.8 percent of the labor force.

The increase in the number of underemployed Filipinos is not surprising given anecdotal evidence that many employees who were asked to return to work were asked to report on a part time basis. This is in line with several companies’ efforts to cut costs. Filipinos with jobs who are working less than 40 hours now account for 40.6 percent of all employed persons, up from 32.4 percent in April and 31.3 percent a year ago. About 3.3 percent of those who said they were employed were not reporting to work. This as some businesses remain closed due to government-imposed restrictions. It is important to note that although underemployed people have jobs, they are earning less and are spending less.It is quite unfortunate that this pandemic-driven recession is happening at a time when the country is supposed to be enjoying a demographic dividend. A demographic dividend happens when the size and share of the labor force increases relative to the total population, leading to rapid economic growth. Note that despite the COVID-19 pandemic and the drop in the labor participation rate to 61.9 percent in July the year from 62.1 percent in the same period last year, the size of the labor force still increased by about 2 percent. Because the relaxation of government-imposed restrictions was largely responsible for the significant improvement in the unemployment numbers, it is understandable why the country’s economic managers are pushing for the gradual reopening of the economy despite the continuous rise in COVID-19 cases. However, the government also needs to do more to control the spread of the virus for the unemployment and underemployment numbers to return closer to pre-COVID-19 levels. Once the number of infections go down, the government can fully reopen the economy without facing any resistance or criticism. People will also feel more confident about going out and resuming the activities they no longer do because of the rising number of infections. This will spur economic growth which will inevitably lead to more job creation, allowing the Philippines to enjoy the demographic dividend that it should now be enjoying. INQ