Angelo Taningco
Economist, Treasury Group

Philippine employment situation has improved as the number of employed persons increased 1.6% year-on-year (yoy) to 40.9 million (m) in April. This has allowed the country’s unemployment rate to drop to 5.5% in April from 5.7% twelve months prior. On average, the unemployment rate stood at 5.4% in January-April, a tad lower than our 2018 unemployment rate forecast of 5.5%. We think the latest labor market trends are supportive of a robust economic expansion, thus, maintaining our 6.8% GDP growth forecast for the year. Likewise, we do not think the current situation of the labor market is already tight that would exert a significant inflationary impact.

The yoy increase in the number of employed was evident in the services and industry sectors and among the professionals, technicians, clerical support and craft and related trades workers. We surmise more labor supply in industry and services have contributed to the sectors’ robust output growth in the first quarter (Q1) of the year. (Similarly, manufacturing output volume growth was relatively strong at 31.1% yoy in April.) In contrast, the employment shares of the agricultural sector and agricultural, forestry, and fishery workers have dropped, which we posit is a potential reason why the agriculture, forestry, and fishing sector’s Q1 output was anemic.

The number of unemployed fell 3.4% yoy to 2.4m in April, evident in the decline of its share for the 15-24 age group. The two regions with the largest labor force, National Capital Region (NCR) and CALABARZON (Region IVA), have relatively high unemployment rates in April at 6.4% and 6.6%, respectively. We computed the average unemployment rate for January-April to be at 5.4%, which is a notch lower than our full-year forecast of 5.5%. An upside risk to our unemployment rate projection is a sharp increase in minimum wages, which is now being proposed by various labor groups in light of inflation being elevated this year. A downside risk, though, is a potential surge in demand for construction workers especially if construction activity gathers steam.

Meanwhile, the number of underemployed climbed 7.2% yoy to 6.9m in April and this was rampant in industry and services and in most regions except NCR with a bigger proportion working at least 40 hours per week. Along this line, the underemployment rate rose to 17.0% in April from 16.1% a year ago.    We conjecture that the higher underemployment was partly a result of workers’ less purchasing power due to rising inflationary pressures. We continue to expect the underemployment rate to stay at double-digit levels.

Figure: Unemployment & Underemployment

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