Monday, June 18, 2007

A second look at the April 2007 labor force survey

ON May 31, the National Statistical Coordination Board announced that the Philippine economy grew by 6.9 percent in the first quarter. Then on June 15, the National Statistics Office (NSO) announced that based on the April labor force survey, unemployment went down significantly.

Those two statistical releases seem to indicate that, finally, the Philippine economy is strengthening and has started to produce more jobs. Maybe—but let’s not celebrate yet.

A keener look at the numbers seems to indicate that our recovery remains fragile and skewed. Those gains in jobs could evaporate unless the government can attract substantial investments in the next three years.

According to the April labor force survey, the country’s unemployment rate, using the International Labor Organization definition, went down from 8.2 percent to 7.4 percent.

That’s not really miraculous because it simply means seven out of a hundred are jobless, compared to eight out of a hundred a year ago. In absolute terms, there are 33.7 million employed people in April this year, compared to 32.7 million in the same month last year—translating to about a million extra jobs.

But given our chronic high jobless rate, that’s an encouraging sign—more so because underemployment has gone down by almost 7 percentage points from 25.4 percent to 18.9 percent.

Lower underemployment could be interpreted to mean there are fewer workers who feel dissatisfied with their jobs during the survey. The underemployed are the ones who think they need more sidelines, more overtime, more working hours, or new high-paying or more satisfying jobs. Their percentage share is down.

Are wages rising? We can only speculate to that effect. That is quite observable in the case of the fast-growing industries like the call centers, other cyber services and electronics.

It’s also possible that the continued flow of skilled workers abroad has started to tighten labor supply, especially among skilled workers. Or it’s also possible that the 6.9-percent growth rate may have really created more job opportunities. It’s quite obvious, given the fact that there are more than a million employed people in April this year than in April last year.

The decrease in underemployment may suggest that those who are already working simply took advantage of the opportunity by moving into those relatively better-paying jobs—maybe. We say “maybe” because, this time, the labor force survey doesn’t provide much detail the way it used to, and we can’t help but wonder what the NSO is trying to hide.

Anyway, if seen by industry or sector, it’s obvious that the share of agriculture in employment has increased. So the farms are contributing significantly despite the fact that agricultural growth has been stable at 4.2 percent.

The share of construction is also rising. This is quite consistent with the supposed recovery in the real-estate sector. And then it’s obvious that private households are hiring more. We are not disparaging the farms, but we know that farm work, as well as construction, tends to be seasonal. It was summer and that’s when people usually start repairing their houses and building up buildings.

By occupation or skills, it’s clear that the percentage share of machine operators and assemblers rose. It seems to suggest the factories are a little busier. Laborers and unskilled labor also have the same trend. This is quite obvious because the farms employ lots of seasonal workers and the construction sector usually hire unskilled labor in summer to do manual and menial jobs.

By class of workers, there is clearly an improvement in the share of wage and salary earners, while that of own- account workers declined.

Is the availability of quality jobs improving? One could be tempted to think that way. Private establishments are definitely hiring; so are private households. The only problem is that those employed in private households are mostly unpaid family members. There’s the rub. So it seems the small guys here are not yet the real beneficiaries of the higher growth rate.

Underemployment has gone down but the gains are largely confined in the industry and services. That seems to validate our earlier observations that so far the major beneficiaries of the recent surge in the economy are urban dwellers. And they are concentrated in the 35-years-and-over category, indicating that those who benefited most were probably supervisory or managerial level workers. Underemployment in the farm sector has actually worsened.

In summary, the major beneficiaries of the 6.9-percent growth are primarily those who are urban dwellers working in the industry and services sectors, mostly in the supervisory and managerial levels. The secondary beneficiaries are those engaged in the farm, construction and real estate sectors whose jobs are probably seasonal or cyclical. More so because those construction jobs were probably triggered by electoral considerations and may therefore vanish once the government feels they are not collecting enough revenues.

How about the other sectors of the economy? The share of manufacturing, mining and quarrying, and electricity, gas and water either went down or stayed the same. The same trend could be observed in wholesale and retail; hotels and restaurants; transport, storage and communications; and finance.

This should be a surprise given the generally higher growth in the economy. Well, if one looks at capital formation in the country’s national-income accounts, which is still in the negative, the trend seems to indicate that we don’t have the critical mass of investments yet to propel the economy forward.

That means that if the government really wants to spread the benefits of growth, it has to attract more investments, especially foreign direct investments, on a scale that our Asian neighbors do. That would, in turn, require really serious investments promotion and significant reforms to improve the investment climate.

Is the government up to the challenge? That’s the question.

(Note: drafted as BusinessMirror editorial, 19 June 2007)

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