PiTiK update: an improved economy
It was several months ago when I last applied my “PiTiK” test that focuses on presyo (prices), trabaho (jobs) and kita (incomes), on our latest economic performance. At that time, the test yielded only one item of good news out of the three. The key development then was that the perennial item of bad news on my three-point test, namely jobs, had turned good; however, the other two had turned for the worse—leading to a one-out-of-three good news record. Price increases were speeding up, with inflation rate approaching 5 percent, while GDP (gross domestic product) growth had moderated to 6 percent after a stellar 7.2 percent in 2013. Jobs were on the rise, however, with the economy generating 1.7 million net new jobs (new jobs created net of jobs lost) as of April, over the same period in the previous year. This was very encouraging as it well outpaced the number of new entrants to the labor force, which averages around 1 million every year. This led to a significant reduction in the number of unemployed workers by 122,000, which translated to a drop in the unemployment rate from 7.6 percent to 7.0 percent.
Furthermore, job quality appeared to be improving, with wage and salary workers (as opposed to unpaid family workers and those who are
self-employed) already comprising a significantly larger portion (57.5 percent) of our workers (as against only less than half in 2000). But I stopped short of declaring that the quality of our economy’s growth was getting better, pending a sustained trend in the positive jobs data. After all, one quarter’s improvement does not yet spell a trend.
Well, there have been two more quarters of jobs data since then, and so far the improvement remains affirmed. July saw the unemployment rate dropping further to 6.7 percent, and net new job generation over the previous year again topped 1 million. In October, the unemployment rate dropped further to 6.0 percent, with net new job creation once more breaching the 1 million mark. This is truly welcome, considering that from 2010 to 2013, the average net new job creation was only around 718,000 per year. The previous administration actually did slightly better in its last six years, with an annual average of 766,000 net new jobs. But things have changed. With annual job creation averaging 1.25 million over three quarters now, there’s reason to be pleased with the way economic growth is finally translating into better job growth as well.
But what about prices and incomes? Price inflation, happily, is slowing down again, and came in at only 2.7 percent last month, after courting 5 percent in the third quarter of the year. This price slowdown is unusual for December, which is normally marked by steeper price increases due to elevated demand brought about by the holiday season. Falling fuel prices, which have far-reaching implications on many other prices, have been mainly responsible for this. As for GDP growth, the third quarter brought disappointing news of a slowdown worse than expected, with the 5.3-percent GDP growth having been largely the result of yet another episode of government expenditure tightening. I’ve described this as a self-inflicted slowdown, provoked by the adverse Supreme Court ruling on the government’s Disbursement Acceleration Program that has put government agencies in a cautious spending mode. The PiTiK test thus now yields a two-out-of-three good news record, with positive news on prices and jobs.
Where did the more than 1 million new jobs come from? Tracing by economic sectors and industries, construction was the single biggest source, creating nearly 300,000 new jobs over the past year. This came primarily from private construction projects, as government construction actually fell by 6.2 percent in the third quarter. Private construction, on the other hand, went up by 15.7 percent over the previous year. Apart from construction, the other key job-generating sectors were hotels and restaurants (accommodation and food service) with 161,000 new jobs, and wholesale and retail trade with 141,000. Agriculture and fishery also generated an encouraging 107,000 new jobs, a figure that is high by historical standards.
By occupational group, laborers and unskilled workers registered the largest gain in jobs, with nearly half a million new jobs created in the past year. This is good news, given that the bulk of the jobless have been in this category; the data in fact show the number of unemployed to have declined by 122,000. Plant and machine operators were the next largest category with nearly 200,000 new jobs, followed by professionals with 163,000 new jobs, and trades and related workers, with 150,000. Based on worker categories, wage and salary workers, particularly in private firms, jumped by nearly 2 million, further raising their share to the total to 58.1 percent. This was accompanied by a decline of more than half a million in unpaid family workers. I see these numbers reflecting (1) general improvement in quality of employment, (2) new vigor in the tourism and manufacturing sectors, both of which are important drivers of more inclusive growth, and (3) a beginning trend toward broader-based, more widely shared economic growth. Consistent with this, the latest official poverty data reported that poverty incidence had gone down to 24.7 percent of all Filipinos, from 27.9 percent in the year before.
More than just growth per se, these are the trends we need to sustain and intensify in the years ahead into the next presidency and beyond. One hopes we will find the right person to lead the way.
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