Philippine Markets Newsletter

PH Monday Macro: The rise in the unemployment rate is not alarming

April 24, 2023

One measure that investors look at to obtain a glimpse of the overall health of the economy is the unemployment rate. Although it is a lagging indicator, it does not invalidate the fact that it is one of the most important figures to evaluate the overall health of the economy.

After the unemployment rate reached its peak of 17.7% in April 2020 due to national lockdowns, the rate has come down to the lowest level recorded in nearly 18 years. However, it is now starting to inch higher.

Let us see what sectors are affecting the unemployment rate.

Philippine Markets Newsletter:
The Monday Macro Report
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There are three main employment sectors in the Philippines. These are agriculture, industry, and services. The largest sector that has the most significant share of employed workers is the service sector which contributes almost two-thirds of the labor force. Agriculture and industry hold around 20% each of the totals.

Under these three sectors, there are many sub-sectors. What employs most of the total labor force is wholesale & retail trade, agriculture & forestry, and construction which contributes 22.67%, 21.35%, and 8.81%, respectively, as of February 2023.

These sectors are what make up the Philippine labor economy. From the historical peak of 17.7% in April 2022, the figure dropped to a historic low of 4.2% in November 2022. However, it is starting to move upward as the February rate has risen to 4.8%.

In terms of quarter-to-quarter changes, from October 2022 to January 2023, the top three sub-sectors that contributed to the rise in the unemployment rate are the following: construction (-557 thousand), fishing and aquaculture (-54 thousand), and agriculture and forestry (-38 thousand).

For the construction sub-sector, the lay-offs for the period are normal for the industry because it has a cyclical labor turnover nature. Construction jobs depend on the number of open contracts that the contraction companies need to fill. When the economy is growing, especially in a developing country like the Philippines, construction employment rises. When the economy is slowing down, employment in the sector moderates.

Another factor in the cyclical nature of the construction sector labor turnover is the weather. Construction jobs rise during the dry season and start to fall when the country enters the rainy season. In this case, employment in construction has been in continuous decline since August of last year.

The rise in unemployment can be attributed to the cyclical labor turnover nature of the construction industry. We’d have to monitor if all other sub-sectors will consistently lay off workers for a trend to be established. For now, unemployment is not alarming as some sectors still employ workers in the thousands.

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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