‘Unemployment may ease in H2’

MANILA, Philippines — The government expects unemployment to ease in the second half as overall economic activity improves and infrastructure spending picks up, according to the Department of Economy, Planning and Development (DEPDev).

“We expect some recovery in the second half, especially in the fourth quarter. So that should improve,” DEPDev Secretary Arsenio Balisacan told reporters when asked for an outlook on unemployment.

Latest data from the Philippine Statistics Authority showed that the unemployment rate rose to six percent in July, the highest since January and February 2022, when it reached 6.4 percent.

The unemployment rate translated to 3.14 million jobless Filipinos in July, higher than the 2.59 million in the previous month and in the same month last year.

Balisacan said that the deterioration in the labor market situation reflects the slowdown in economic growth observed in the second quarter.

Economic growth in the second quarter slowed to 2.3 percent, the weakest performance in five years, amid high inflation that dampened consumption and slower public infrastructure spending following the flood control controversy.

Balisacan said he expects better labor market conditions in the second half as economic activity improves.

“In the third quarter, hopefully we can manage to go up a bit. But with the improvement in the economic activity in the second half, especially in the fourth quarter, I think the labor market will also adjust,” he said.

He said that problems related to the slowdown in public construction are expected to be resolved as government infrastructure spending picks up.

Flood control corruption issues have led to the government’s stricter project review and delays in public infrastructure spending and project execution.

“That is now gradually being unclogged,” Balisacan said.

For GlobalSource Partners country analysts Diwa Guinigundo and Wilhelmina Manalac, the latest unemployment result should be treated by the government as an early warning signal, with the economy growing at a pace that may no longer be enough to comfortably absorb a rising labor force, while inflation remains elevated.

“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,” Guinigundo and Manalac said in a report.

Management Association of the Philippines president Donald Lim said that hiring activity is guided by businesses’ outlook on the economy.

“Business will always operate on a level of predictability and stability. If it is unpredictable and unstable, you will be conservative. Conservative means you will not hire first,” he said.

He said that the country’s economic performance may be a reason why businesses are not hiring more workers.

Even if the economy recovers, he said that businesses are unlikely to immediately increase staff numbers.

He said that the emergence of new technology such as artificial intelligence (AI) is helping some employees perform the work without the need to hire additional staff.

While AI use is also expected to help create new jobs, he said that companies are currently in the transition period and these new jobs are still being determined.

Balisacan said the information technology – business process management industry is currently using AI to tap opportunities to provide higher value services.

“That means that they’re working closely with other sectors, including the public sector, in upscaling their workforce. If we succeed in upscaling them, I don’t think that, and this is supported by the industry itself, that they (employees) will be replaced,” he said.

Lim said that the country’s labor laws are also among the reasons that may be affecting hiring activity.

“I think our labor laws are quite challenging versus other countries,” he said.

Local labor laws protect employees’ security of tenure. As such, companies cannot just make immediate workforce adjustments or let employees go without complying with certain processes.

Lim said the minimum wage hike adjustment in the National Capital Region may also be another factor affecting hiring decisions, particularly of small and medium enterprises.

“Business in general, maybe with technology and maybe whatever benefits the economy will give them, can give them a boost. But it does not now equate to hiring because hiring in the Philippines is hard. There are many conditions,” he said.