Where are new jobs coming from?

Finally, we got some good news on the jobs front with the latest jobs statistics coming out of the April 2014 quarterly Labor Force Survey. I say “finally” because in my usual “PiTiK test” on the economy—tracking Presyo (prices), Trabaho (jobs) and Kita (incomes)—it is in jobs where the last four years (under the Aquino administration) had failed to improve on the previous six years (under Gloria Arroyo). On prices, the annual inflation rate, or rate of increase in the general price level, averaged 3.6 percent over the last four years (2010-2013), against 5.8 percent in the previous six years (2004-2009). Total incomes, measured by gross domestic product (GDP), had grown at an average annual rate of 6.4 percent in the past four years, against only 4.9 percent in the previous six years. The news has thus been generally good on prices and incomes, at least in aggregate.

However, net new job creation averaged only 718,000 per year in the last four years, lower than the 766,000 annual average posted in the previous six years. This has been the persistent spoiler in the otherwise good economic news we’ve been reaping in recent years, affirmed by consistent upgrades from credit rating agencies and a record jump in our world competitiveness rankings. But even as our economy grew by 7.2 percent last year, the number of jobs grew by a mere 0.17 percent—a glaring reminder of how badly we need economic growth that is more inclusive.

Well, it seems that things have now turned around. Just as news on prices and incomes have lately turned for the worse, the news on jobs has suddenly gotten better—much better, in fact. We all know the latest not-so-good news on prices and incomes: Price inflation is now edging up toward 5 percent (it’s been 4.9 percent in the last two months), and GDP growth has moderated to 6 percent as of the first half of the year. But lo and behold, we gained about 1.7 million jobs between April 2013 and April 2014, more than double the average we posted in the past four years. Based on the latest data, jobs over the last 12 months grew by 4.5 percent, no longer lagging far behind the economy’s growth rate. As a result, the unemployment rate has also dropped significantly from 7.6 percent a year ago to 7 percent today.

So now, my PiTiK test yields only one out of three of good news, a reversal of last year’s scorecard of two good and one bad. It seems strange that such a surge in new jobs would come at a time when the economy’s growth is actually slowing down, and price increases are speeding up. This is not the first time I’m seeing this phenomenon, and it merits closer examination to understand what exactly is happening. Fortunately, the Labor Force Survey data are disaggregated into economic sectors, types of occupation, and categories of workers to permit such closer examination and analysis.

Of the 1.7 million new jobs as of last April, the bulk (nearly a million) was in the services sector. More than half of these were in wholesale and retail trade, probably mostly in the latter. These could represent new jobs in established or newly opened retail establishments ranging from small  sari-sari  stores to establishments in shopping malls, including large department stores. Or these could also count individuals who are simply vending their wares on the street or in  tiangge  (flea markets), or those who are “nangangalakal”—that is, scavenging in garbage dumps and selling whatever might be of value therein (to recycling shops and others). Unfortunately, one cannot readily tell from the published tables how much is coming from which type of trading jobs.

“Other services,” which appears to subsume call centers and business process outsourcing, contributed around 115,000 new jobs, while administrative and support services (office workers) accounted for 86,000 new jobs. Meanwhile, nearly 400,000 additional jobs came from industry, particularly manufacturing and construction, with close to 200,000 new jobs created in each. Agriculture also generated 352,000 new jobs. All together, these numbers suggest to me that recent growth in the economy, while more moderate, has been more broad-based, hence probably more inclusive.

The composition of the new jobs in terms of occupations and worker categories seems to support this. The occupational group with the largest gain in jobs was laborers and unskilled workers, with nearly half a million new jobs created in the past year. This is good news, given that the bulk of the jobless is in this category; indeed, the number of unemployed declined by 122,000 workers. Services and sales workers were the next largest category with nearly 400,000 new jobs, followed by farm, forestry and fishery workers with close to 300,000 new jobs. I see in these numbers a good balance between jobs in the urban and rural sectors.

In terms of worker categories, wage and salary workers had the largest increase of nearly one million new jobs, with those working for private firms comprising the bulk. It’s worth noting that wage and salary workers now make up 57.5 percent of all employed workers; in 2000, they accounted for less than half (49 percent). Meanwhile, there are 445,000 new self-employed workers, of whom 127,000 own a business and employ other workers. With the proportion of unpaid family workers dropping to 11 percent from 14 percent in 2000, the trends suggest an improving quality of employment.

Is the quality of our GDP growth getting better, then? The July jobs data are due to come out shortly. I’d hold back on a verdict until we see if the good news on jobs is indeed being sustained.

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