Unemployment, Underemployment rise amidst weak job creation

July 2006 Labor Force Survey

After easing in the last six quarters, unemployment rose again in July this year, even as underemployment continued to hit new highs since 1998, according to the latest labor force survey (LFS) done by the National Statistics Office (NSO). While the economy manages to add jobs, this has failed to match the growth in the labor force, resulting in deeper jobs deficit.

Unemployment went up to 11.7% in the third quarter compared to 10.9% in the same period last year. After six consecutive quarters of decline, the number of jobless Filipinos jumped by 395,000 in July to 4.4 million from 4.0 million in the same month last year.

Higher unemployment came on the back of slow job creation. Net job creation was 736,000 over the last 12 months even as the labor force grew by 1.1 million resulting in rising joblessness. The pace of job creation was in line with expectations given moderate 5.5% GDP growth in the second quarter of 2006.

Unlike in previous quarters when the bulk of new jobs came from agriculture, additional jobs in July came mostly from services, which added 873,000 jobs from its year-ago level. By contrast, agriculture lost 149,000 jobs while employment in industry barely nudged.

Significantly, underemployment rose to 23.5% in July from 20.1% in the same period last year. This translates to an increase of 1.3 million underemployed workers. Underemployment has been surging since April 2005 just as unemployment began to taper off. Rising underemployment at a time when the economy continues to produce jobs indicate poor quality of employment being generated.

Visible underemployment or involuntary part-time employment also increased to 13.3% up from 12.6% in July 2005. This brings visible underemployment to 13.7% in the first three quarters of 2006, the highest rate since the current data series started in 1988. Rising involuntary part-time employment in recent quarters can be traced to the fact that new employment has been coming mostly from agriculture. Jobs in agriculture are characterized by short work hours.

The shift to services as the major source of new jobs in third quarter 2006 has, however, resulted in higher invisible underemployment, which reached 9.8%, up from 7.5% in July 2005. Invisible underemployment refers to full-time workers wanting additional work hours owing mainly to low earnings. The number of invisibly underemployed rose by 826,000 to 3.3 million based on the latest data. Many jobs in services are characterized by long work hours to compensate for low earnings.

Escalating underemployment is important because it may also indicate rising poverty incidence. The underemployed are likely to become working poor given insufficient incomes to carry their families above the poverty line. Moreover, regional underemployment is positively related to poverty incidence. Regions with high underemployment rates tend to have high poverty rates. The latest poverty statistics available, however, is for 2003, hence does not reflect this new trend.


Clarence Pascual
Labor Education and Research Network (LEARN)
15 September 2006