By Cai Ordinario, September 4, 2020; Business Mirror

THE double-digit national jobless rate will continue to hobble Philippine economic performance in the third quarter, local analysts said on Thursday following the release of the results of the July Labor Force Survey (LFS).

The Philippine Statistics Authority (PSA) said the country’s jobless rate increased to 10 percent in July 2020 from 5.4 percent in July 2019. However, the rate is an improvement from the 17.7 percent posted in April 2020.

The PSA noted that among the regions with the highest unemployment rates are the country’s primary growth centers—National Capital Region, Calabarzon and Central Luzon with unemployment rates of 15.8 percent, 12.4 percent and 10.9 percent, respectively.

“As long as unemployment is high, output will still be limping. We expect Q3 [third quarter] GDP at -10.6 percent, seemingly reflecting this latest 10-percent unemployment rate,” Unionbank Chief Economist Ruben Carlo O. Asuncion told the BusinessMirror.

Asuncion said single-digit GDP growth performance will likely happen in the last quarter given Filipinos’ holiday spending.

He said economic growth in the last quarter of the year may contract 3.9 percent. This will lead to a full-year contraction of 8 percent this year, deeper than the government’s expectation of a contraction of 5.5 percent.

Ateneo Center for Economic Research and Development (ACERD) Director Alvin P. Ang told the BusinessMirror that it is likely that third-quarter GDP would contract 10 percent.

“We may end the year in single-digit unemployment already but still at close to 10 percent,” Ang said.

In a statement, ING Bank Manila Senior Economist Nicholas Antonio T. Mapa said the improvement in unemployment rate compared to April “kindle hopes for a rebound.”

However, Mapa said this will not do much for the country’s GDP growth numbers as the economy is expected to continue contracting until the first quarter of 2021.

He said the chances of reversing the unemployment rate to around 5 percent may be remote until economic growth gets back to the 6-percent level.

“The improvement in unemployment figures mirrors the trend seen in other indicators, bouncing from the lows during ECQ [enhanced community quarantine] but still [away] from pre-pandemic conditions. Given the sustained rise in new infections and partial lockdown measures in place, unemployment figures will likely remain elevated well into next year,” Mapa said.

In its Market Call report, First Metro Investment Corporation-University of Asia and the Pacific (FMIC-UA&P) Capital Market Research said that while the worst is over for the economy, GDP growth in the third and fourth quarters will continue to contract.

The local think tank said the economy will continue to be affected by the high number of Covid-19 cases, limited public transportation especially in Metro Manila, and the US-China trade war, among others. It said, however, that there are month-on-month gains in the real economy, such as in manufacturing, capital goods imports, exports and probably construction.

“We think the Philippine economy has bottomed even though we will likely still see a significant single-digit fall (year-on-year) in Q3 with further improvement in Q4. However, the full-year GDP will likely register its first decline since 1998,” the think tank said.

“The unexpectedly deeper dive of GDP in Q2 [second quarter] has lessened positive sentiments on the economy’s ability to get back to a fast growth pace,” it added.

Better prospects

Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said the country’s performance is improving as he estimated that around 1.1 million jobs are being created through the government’s “Build, Build, Build” (BBB) program.

Chua said this already included direct and indirect job creation data. It can be noted that infrastructure has “high multiplier effects” on the economy.

By next year, Chua said the BBB can create even more jobs estimated at 1.7 million. As the economy further loosens restrictions on economic activities, more jobs will be created and are estimated to reach 2.4 million to 2.8 million additional jobs next year.

Chua said, however, this will depend on the improvements, particularly on lowering the level of quarantine, which rests on the ability of all to follow minimum health standards.

He also said more jobs can be created next year if the government improves testing, tracing, isolation capacity and, lastly, the extent to which the government is able to open public transportation.

“If we achieve all these, we will see 2.4 million to 2.8 million additional employment next year that will allow us to lower our unemployment rate to around 6 percent to 8 percent by next year. This will be a gradual lowering,” Chua said.

The state of the country’s labor market is improving as the LFS recorded a 7.5-million increase in employment compared to April. It added that all 17 regions showed employment improvements from the previous quarter.

Neda also said employment in agriculture and forestry increased by 2.1 million from April, with higher agricultural output.

Within the industry sector, employment growth was seen in construction with 1.2 million additional employment as the Build, Build, Build program and other construction activities resumed, as well as in manufacturing at 671,000 additional employment.

The July survey figures show a direct link between the level of quarantine restriction and labor market outcomes. In the first half of May 2020, more than three-fourths of the economy was placed under ECQ. As a result, GDP and unemployment worsened to record levels.

In contrast, in the first half of July 2020, only 2.1 percent of the economy was placed under ECQ. The result is a significant reduction in the unemployment rate and the return of some 7.5 million jobs.

“Without the public transport system back sufficiently, many people cannot go back to work. To illustrate, under GCQ, the share of the NCR economy that is allowed to open is 58.2 percent, but without sufficient public transport, it falls to 35.5 percent,” Chua said.

Informal workers

Meanwhile, Ang traced the double-digit growth in unemployment mainly due to the GCQ that was in place in June. The GCQ prevented workers, including those in the informal sector, from working.

Asuncion said the informal-sector workers, particularly those who are daily-wage earners, may have caused the uptick in unemployment in July. He said these workers who are the hardest hit include street vendors and the neighborhood carpenters/handymen who do odd jobs in local communities.

National Statistician Claire Dennis S. Mapa told the BusinessMirror there was also a “big jump” in underemployment which may also be due to informal workers.

The highest underemployment increases were observed in workers in private establishments at 735,000 and those who are self-employed at 516,000.

In terms of industry, Mapa said the highest increases were in wholesale and retail trade, with 315,000 joining the ranks of the underemployed; transportation and storage, 257,000; manufacturing, 113,000; and agriculture, 401,000.

“For underemployment, I think that this has declined from the April survey but still higher than July 2019. It is highly likely that the most vulnerable one in the labor sector have contributed to the uptick. During a crisis, the vulnerable jobs are the ones easily laid off or affected,” Asuncion said.

The government noted that the underemployment rate improved to 17.3 percent in July from 18.9 percent in April, as the increase in underemployed workers was outpaced by the overall increase in employment. The underemployment rate was at 13.6 percent in July 2019.

LFS results

The PSA said employed persons who reported with jobs but are not at work were estimated at 3.3 percent or 1.4 million employed Filipinos in July 2020, with Covid-19 pandemic or community quarantines as the main reason given, similar to that of the second quarter.

This was estimated at 0.8 percent or 328,000 employed persons with a job but not at work in July 2019, and 38.4 percent or 13 million in April 2020.

The number of underemployed Filipinos reached 7.1 million as of July 2020, given the varying working arrangements and reduced working hours implemented by companies/establishments. In July 2019 and April 2020, about 5.8 million and 6.4 million Filipinos, respectively, were underemployed.

Arts, entertainment and recreation was the most affected sector in July 2020 with a drop in employment rate of 72.9 percent year-on-year, and a drop of 41.4 percent compared to the second quarter of 2020.

Employment rate in accommodation and food service activities came next. It dropped by 35.9 percent from last year, although there was an increase of 4.7 percent from April 2020.

The youth labor force participation rate improved in July 2020 at 38.9 percent, compared to 38.3 percent in July 2019, and 32.4 percent in April 2020.

There were about 7.8 million Filipino youth who were either employed (6 million) or unemployed (1.7 million) as of July 2020. In April 2020, about 6.5 million youth were in the labor force, of which 4.4 million were employed and 2 million were unemployed.