More economic pain coming

(First of two parts)

It has already been six months and counting, and worse — the US-Iran conflict appears to be escalating.

Just like most prolonged conflicts, there is a point when war fatigue sets in and the world resumes and adjusts to the economic dislocation.

For us in the Philippines, after the third month of the US-Iran conflict and the resulting spike in crude oil prices and the resulting upward pressure on prices for just about everything, we have adjusted and have been chugging along with the usual Filipino positivity and acceptance of “matatapos din yan” or “it will end eventually.”

In fact, we have already set plans for the holidays — the malls are already decked out in Christmas lights and colorful decorations. Sales are on offer for those who want to buy cheap gifts this early.

I have bought some food ingredients early, knowing that prices will continue to go up due to the unstable geopolitical situation. My family, relatives and friends know that we will still celebrate our Christmas traditions and must try to save up by buying some items ahead while we can before another round of price increases is effected or those items run out of supply due to trade disruptions.

Early in the conflict, there were fears that Iran could effect a pincer move on the Persian Gulf region with the help of the Houthi rebels. However, the US, after a series of attacks that failed to bring Iran down to its knees, appeared ready to take a diplomatic approach to settle the conflict.

But as we all know, the volatile US President appears to have too many things going on at once, so much so that an effective peace agreement cannot be reached. And even while the US has not made any progress on its conflict with Iran and on the now four-year-long Ukraine-Russia War, it has embarked on a trade war with its closest neighbor and former ally, Canada.

Worst, the US President, once again appears ready and willing to unleash another round of tariff adjustments on all of its trade partners.

Looming unemployment

According to a report co-authored by former Bangko Sentral ng Pilipinas officials Diwa Gunigundo and Wilhelmina Manalac for Global Source Partners titled “Unemployment surges as growth loses momentum,” the July 2026 labor-market data present a seemingly reassuring picture: employment remains relatively strong and unemployment is contained. Yet beneath the headline numbers are signs that deserve closer attention.

The report warns that “the labor market does not operate in isolation; it reflects the strength, composition and momentum of economic activity. When employment gains are concentrated in lower-productivity or informal activities, while hours worked, job quality or the pace of hiring soften, a low unemployment rate can mask underlying weakness. The July figures, therefore, need to be read alongside the broader evidence of a slowing economy and persistent price pressures.”

The more important question, Gunigundo and Manalac point out, “is not simply whether Filipinos have jobs, but whether the economy is generating enough productive, stable and adequately paid jobs to sustain household incomes and consumption. If output growth continues to lose momentum while inflation remains elevated, the economy could face a difficult combination of weaker demand and continuing cost pressures.”

They argue that “the labor-market numbers should, thus, be treated as an early warning signal rather than a reason for complacency. The policy priority should be to revive investment and productivity, strengthen sectors capable of creating quality employment and ensure that growth translates into better jobs and real income gains for Filipino households.”

The Philippine labor market, the report noted, “delivered an unsettling signal in July 2026. The unemployment rate rose sharply to six percent, equivalent to about 3.14 million Filipinos without work, from 5.3 percent a year earlier. This was also significantly higher than the 4.9 percent recorded in June. The July figure is the highest unemployment rate recorded since the pandemic period and points to a labor market facing increasing difficulty in absorbing new entrants.”

“At first glance,” Gunigundo and Manalac wrote, “the increase could be partly explained by a welcome development: more Filipinos are entering the labor force. The labor force participation rate rose to 63.6 percent in July from 60.7 percent a year earlier, bringing the labor force to 52.36 million. More young Filipinos, including fresh graduates, are actively looking for work. This is normally a sign of confidence and expanding economic opportunity.”

However, they continued, “The July labor report therefore needs to be read together with the broader growth numbers. Philippine GDP expanded by only 2.3 percent in the second quarter of 2026, down from 2.8 percent in the first quarter.

(To be continued)