The puzzle of the lost jobs
I heard that President Aquino had members of his Cabinet look closely into how the economy lost nearly a million jobs last year in spite of an exceptional 7.2-percent gross domestic product (GDP) growth in the same period. I called attention to the disturbing statistics at the Philippine Development Forum held in Davao last week, as a panelist in the session where Secretaries Balisacan, Abad and Purisima had summarized the Aquino administration’s economic achievements so far. The President was heard saying that the economist in him found it hard to reconcile such massive job losses with such impressive economic growth.
The alarming employment data had actually been out since mid-December, when the National Statistics Office (NSO) released the results of the quarterly Labor Force Survey taken last October, the final report for the year. The question that naturally comes to mind is: Where did we lose all those jobs? Closer examination of the data yields some observations that partly shed some light, but also seemingly deepen the puzzle of “job-reducing growth” that the data appear to suggest.
On a sectoral analysis, agriculture, fishery and forestry accounted for the bulk of the jobs lost, with 669,000 jobs less, around 100,000 of which were in fisheries. Natural calamities would seem to be a plausible explanation, but the labor data were for October—well before Typhoon “Pablo” devastated large areas of farmlands in Mindanao. In fact, detailed GDP data for the third quarter show hefty year-on-year increases in the production of major crops. Rice, corn and sugarcane production actually grew at double-digit rates, with pineapple, coconut and banana also posting good growth. How can agriculture lose hundreds of thousands of jobs and yet grow the way it did, then? Did labor productivity on our farms suddenly improve? A senior Cabinet member told me that they are still scratching their heads on this one. I am, too.
The services sector recorded a loss of more than 300,000 jobs, with wholesale and retail trade losing nearly half a million jobs. But this was offset by around 170,000 new service jobs created in hotels and restaurants, showing that the tourism boom has been a bright spot in the overall jobs picture. Around 122,000 new jobs were also recorded in the public sector, apparently associated with government construction projects that were substantially hiked in 2012 after a somewhat debilitating spending cutback in 2011. The rest of the services industries posted either slight increases or slight to moderate job losses.
How could wholesale and retail trade lose hundreds of thousands of jobs when a number of large new shopping malls actually opened around the country in 2012? Are the job numbers more due to informal tiangge traders and ambulant vendors getting out of business by the hundreds of thousands last year? The GDP data show trade to have actually grown by 8.2 percent in the third quarter, and 7.5 percent for the whole year. So I’m scratching my head on this one as well.
It’s in the industry sector where the jobs data show a positive overall gain, with around 100,000 net new jobs created. The data show a gain of some 118,000 jobs in construction and 34,000 jobs in mining, offset by several thousands of jobs lost in utilities and manufacturing. The picture is consistent with the double-digit growth in both public and private construction last year. But it doesn’t seem to square with the 3.7 percent drop in mining output and the 5.1- and 5.4-percent growth posted in utilities and manufacturing, respectively. In mining, we see jobs going up where output actually declined. A case of falling productivity this time? This seems questionable in an increasingly mechanizing industry, so the puzzle remains.
Where sectoral and occupational analysis fails to shed light on the puzzle, analysis based on labor categories provides a more plausible story. It turns out that the lost jobs were entirely in the unpaid family labor and self-employed categories. In fact, wage and salary workers increased by more than 400,000, which is good news. The NSO defines unpaid family labor as members of the family who assist in the operation of the family farm or business enterprise and who do not receive any wage or salary for their work. The data show more than 700,000 of these plus some half a million self-employed workers having dropped out. Through all this, labor force participation rate had dropped significantly from 66.3 to 63.9 percent, translating to almost 800,000 leaving the labor force, either to go back to school or concentrate on household chores. This explains why unemployed workers only went up by 120,000 even as the number of jobs shrank by nearly a million.
And so, the story one can piece together from all these is this: Large numbers of young people—who comprise the bulk of the unemployed in the data—stopped working as unpaid workers in family farms and businesses or as informal traders. Many of them went back to school. My Cabinet-member friend told me that their education colleagues affirmed significant increases in enrollment in the past year. Their departure had little impact on recorded output, as they had either been highly underemployed or previously undetected by the GDP data, anyway. Meanwhile, full-time and wage/salary-paying jobs actually increased by hundreds of thousands—the silver lining in the otherwise troubling jobs data.
The jobs data may not be as alarming or as puzzling as they initially look, then. Still, P-Noy and his Cabinet have a lot more work to do to get the inclusive growth that we all want.
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