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Wednesday, February 12, 2014

On the Sudden Rise of Joblessness in the Philippines

Yesterday, President Aquino sounded positively clueless regarding the sudden rise of joblessness in the last quarter of 2013 when the economy itself grew at a blistering pace of 7.2%.  The incident that sparked his supposed cluelessness was a finding from a Social Weather Stations (SWS) survey that the unemployment rose to 27.5%, or six percentage points higher than the 21.7% unemployment rate SWS reported in the previous quarter.

For the uninitiated, SWS  is a Philippine-based private non-profit social research institution which conducts period statistical surveys on Philippine economics, politics, and other matters.  It sometimes functions like a shadow statistical agency, similar to but not quite like John Williams' in that it tries to uncover problems in government statistical reporting that can come across as biased, self-serving, and often manipulated.  The key difference is that SWS conducts its own statistical surveys, while Shadowstats works with and recomputes US government data using alternative methodologies.  SWS' own report, as reported in Businessworld, can be found here.

Meanwhile the government's own report shows similar, but not quite as steep, declines in employment. Although the potential labor force (population 15 years and older) grew by 862K people or 1.37% from 2012 to 2013, the economy only added 317K jobs during this period, leaving an additional 475K out of the labor force.  As a result, the Labor Force Participation Rate dropped 0.3% from 64.2% in 2012 to 63.9% in 2013.  According to the Bureau of Labor and Employment Statistics (BLES), the drop was most pronounced among the male workforce (-0.4%) and among the youth (-0.8%).

As a result, the nation's Employment to Population Ratio, which measures the proportion of the country's working age population that is employed and that is often cited as the best measure of labor market conditions, decreased from 60.7% in 2012 to 59.4% in 2013.  Because so many people dropped out of the labor force, Unemployment only increased by 70K people in 2013 and the Unemployment rate marginally inched up from 7.00% in 2012 to 7.1% in 2013.

Historically, the Labor Force Participation Rate of 63.9% is back near the lows of the last decade (2006 to 2008).  The same holds true for the Employment to Population Ratio, which at 59.4% is back to the levels of 2006 to 2009.  Unemployment wise, we are still hovering at historic lows.

Have we slipped back in time employment wise?  Maybe not yet.  Generally, employment is usually a lagging economic indicator, meaning employment falls generally after other economic or market conditions have deteriorated.  Given the robust economic performance of the country in 2013, that hasn't happened yet.  But in an era of weak labor markets worldwide, particularly in US and Europe, maybe employment has become a leading indicator and has become a harbinger of things yet to come.  That is up for the experts to decide.

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