Philippine Markets Newsletter

PH MONDAY MACRO: Improvements in employment come at the right time as the Philippines enters the longest Christmas season in the world

September 12, 2022

In 2020, unemployment rate peaked at all-time highs, while labor force participation rate fell to troughs. This meant even with a lot of people dropping out of the workforce, there was still a significant number who could not find work during the pandemic.

While conditions improved in 2021, unemployment rate remained at the high end of historical levels. To make things more concerning, inflation rate jumped to 6.4% in July. Fortunately, it stabilized at 6.3% in August 2022, putting off any major risks of a market downturn for now.

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Unemployment rate is one of the easiest metrics investors and analysts look at to get a gauge of the state of an economy.

High unemployment rate meant lower consumer spending power, which also meant lower demand for goods and services. Lower consumer demand meant lower potential revenue for companies, which also meant lower GDP if the government does not pick up the slack through additional spending. It’s a vicious cycle.

Conversely, when we see improvements in employment, we’ll see a virtuous cycle of economic recovery once consumer spending picks up. This is likely to happen sooner rather than later.

In fact, we’re already seeing signs of recovery.

July 2022 unemployment rate fell to 5.2% and labor force participation rate rose to 65.2%. Underemployment remained steady at 13.8%, much lower than the 21% reported in July 2021, and around the average 2022 levels so far.

While employment metrics are typically a lagging indicator of economic recovery, they do provide insight into the overall direction of the economy. If we were to look at a leading indicator such as consumer confidence, we’ll see the same narrative—consumers are less pessimistic about the economy for the next few months.

At -5.2%, this is the highest recorded in the consumer confidence index since 2020. This reflects consumers’ expectations of more available jobs and higher income in the months to come.

… and this confidence shows as well in improving foot traffic at malls and various establishments, with foot traffic rising to nearly 80% from the 40% levels in 2021.

As we enter the longest Christmas season in the world, we expect spending to increase, especially as restaurants and events places fill up again and consumers ramp up gift buying for the holidays.

About the Philippine Markets Newsletter
“The Monday Macro Report”

When just about anyone can post just about anything online, it gets increasingly difficult for an individual investor to sift through the plethora of information available.

Investors need a tool that will help them cut through any biased or misleading information and dive straight into reliable and useful data.

Every Monday, we publish an interesting chart on the Philippine economy and stock market. We highlight data that investors would normally look at, but through the lens of Uniform Accounting, a powerful tool that gets investors closer to understanding the economic reality of firms.

Understanding what kind of market we are in, what leading indicators we should be looking at, and what market expectations are, will make investing a less monumental task than finding a needle in a haystack.

Hope you’ve found this week’s macro chart interesting and insightful.


Stay tuned for next week’s Monday Macro report!


Angelica Lim
Research Director
Philippine Markets Newsletter
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