January 2006 LFS Job creation still weak The labor market turned in a lackluster performance at the start of this year despite unexpectedly strong economic growth in last quarter of 2005. Based on the January 2006 Labor Force Survey(LFS), employment grew at a moderate pace even as the quality of jobs created was generally poor. Unemployment declined as more workers left the labor force. Like in previous quarters, underemployment surged, erasing gains made in this area in recent years. Strong GDP growth of over 6% in 4 th quarter 2005 had raised hopes that the economy would weather unfavorable global and domestic conditions. On the global front, runaway oil prices threa 1 ten to stoke inflation, forcing central banks

in developed countries to raise interest rates, which in turn, could translate to higher interest payments for heavily indebted countries like the Philippines. Worse, it could trigger capital flight resulting in devaluation of the peso. On the domestic front, rising oil prices is compounded by the government’s need to raise local tax rates to finance a huge deficit, discouraging consumer spending. Meanwhile the unresolved political crisis discourages investment. The latest economic data seem to show the Philippine economy overcoming adversity as GDP growth accelerated in the 4 th quarter against expectations of a slowdown. But the employment data in the first month of the year indicates that high GDP growth in the previous quarter did not have a strong impact on the labor market. No relief is in sight in the coming months, and the labor market is likely to remain in the doldrums. Job creation Net job creation over the past 12 months was recorded at 750,000, according to the January round of the Labor Force Survey(LFS) conducted by the National Statistics Office (NSO). Net job creation—the change in the number of employed persons over a 12-month period—in 1 st quarter 2006 looks impressive compared with the dismal 80,000 new jobs recorded the same period last year. But job creation in January falls short of the government’s target of 1.5 million jobs per annum, which is what is needed to bring down joblessness. For the government to reach its target this year, job creation must more than Table 1. Basic labor force indicators, levels(in thousands) Total 2005 Jan April July Working Age Population 53,975 55,997 54,583 Labor Force 35,664 36,929 36,517 Nonlabor Force 18,311 19,068 19,347 Employed 31,634 32,221 32,521 Unemployed, Old Definition 4,030 4,708 3,996 Underemployed 5,097 8,422 6,523 Visible 3,286 4,569 4,090 Invisible 1,811 3,853 2,433 Underutilized 9,127 11,331 9,238 Source: National Statistics Office 2 Oct 54,797 36,659 18,138 32,876 3,783 6,970 4,102 2,868 10,753 2006 Jan 55,248 36,262 18,986 32,384 3,878 6,895 4,186 2,546 10,773

double for the rest of the year. But this requires even faster GDP growth rates, an unlikely scenario given the difficulty of sustaining current growth levels in view of unfavorable external and local environment. Farming leads The biggest number of new jobs came from agriculture, followed by services, while industry posted job losses. Employment in agriculture, fishery and forestry sector grew by 4.2% over the year-ago level. With net job creation at 475,000, the sector accounted for two-thirds or 63% of net new jobs in the economy. In the service sector, the highest gains were posted by private households, which generated 102,000 net new jobs equivalent to 14% of total net job creation during the period. This was followed by wholesale and retail trade sector which added 85,000 jobs or a share of 11% of total net job creation. Industry sheds jobs In contrast, the number of jobs in industry dropped by 1.9% or a net loss of 95,000 jobs in January 2006. This comes on top of an earlier net loss of 73,000 jobs in the same month the year before. The bulk of job losses occurred in construction, indicating a slowdown in construction activity. Table 2. Basic labor force indicators, rates(in percent) Rates 2005 2006 Jan April July Oct Jan LFPR 66.1 65.9 66.9 66.9 65.6 NLFPR 33.9 34.1 35.4 33.1 34.4 Employment Rate 88.7 87.3 89.1 89.7 89.3 Unemployed, Old Definition 11.3 12.7 10.9 10.3 10.7 Underemployment Rate* 16.1 26.1 20.1 21.2 21.3 Visible 10.4 14.2 12.6 12.5 12.9 Invisible 5.7 12 7.5 8.7 7.9 Underemployment Rate** 14.3 22.8 17.9 19 19 Visible 9.2 12.4 11.2 11.2 11.5 Invisible 5.1 10.4 6.7 7.8 7 Underutilization Rate** 25.6 30.7 25.3 29.3 29.7 Employed-to-population 58.6 57.5 59.6 60 58.6 Source: National Statistics Office 3

Table 3. Job creation by industry(in thousands) Employment Generated Jan Agriculture 185 Agriculture, Hunting& Forestry 174 Fishing 11 Industry-73 Mining& Quarying 6 Manufacturing-109 Electricity, Gas& Water 18 Construction 12 Services-26 Wholesale& Retail, repair of Motor Vehicles, Motorcycles& Personal 87 Household Goods Hotel& Restaurants 6 Transport, Storage& Communication 90 Financial Intermediation-23 Real Estate, Renting& Business Activities 14 Public Administration& Defense, -42 compulsory Social Security Education 22 Health& Social Work 17 Other Community, Social& Personal -116 Services Private Household with Employed Persons-79 Extraterritorial Organizations& Bodies-2 Total-13 2005 2006 April July Oct Jan -121 540 404 474 -146 513 362 479 25 27 42-5 106 66 4-95 -3-3 20-9 138 12 25-18 -18 1-13 5 -11 56-28-73 698 283 734 371 424 163 423 85 86 54 72 30 28-46 26 21 25 10 39 37 107 24 32 44 -126 83 44 7 76 29 30 58 36 5 2-32 -25-68-29 18 68 29 93 102 -1 0 2 1 1,487 1,238 1,880 1,026 Source: National Statistics Office Thus, agriculture, private households, and wholesale and retail trade together accounted for 98% of job creation in the first month of the year. Given low average productivity and pay in these sectors, this indicates generally poor quality of job creation. Compounding low job quality is the continued loss of jobs in the industry sector.(See Table 3) Poor job quality The poor quality of jobs created during this period is evidenced by growth in part-time jobs and unpaid family 4

workers. Most of the new jobs were part-time jobs which increased by 651,000 accounting for 87% of total net job creation.(See Table 4) While all classes of workers posted employment gains, unpaid family workers recorded the biggest increase at 389,000 or 52% of net job creation. Most of them were found in agriculture and likely to be employed part-time, hence the huge increase in part-time workers. Unemployment eases? Despite slow job creation, open unemployment slightly fell to 10.7% in January 2006 from 11.3% in the same period the year before. The number of unemployed workers also declined to 3.9 million from 4.0 million over the same period. These figures are based on the old official definition. If we use the new definition, the unemployment rate is lower at 8% in January 2006 or 2.8 million jobless workers. But there is no comparable figure for January 2005 since the government began using the new definition only in April 2005. Lower unemployment was accompanied by a lower labor force participation rate, which dropped to 65.6% from 66.1%. This explains the fall in unemployment despite slow employment creation. Many jobless workers left or did not bother to join the labor force given poor employment prospects, thus were not counted among the unemployed. Table 4. Employment level and generation by hours worked(in thousands) Employment level 2005 2006 Jan April July Oct Jan Full Time(40 hrs& over) 19,814 20,075 20,240 20,609 19,983 Part-time(Less than 40 hrs) 11,323 11,526 11887 11830 11,974 Did not Work 496 616 394 437 427 Total 31,633 32,217 32,521 32,876 32,384 Employment generated Full Time(40 hrs& over)-214 2,716 107 662 169 Part-time(Less than 40 hrs) 228-1,525 803 619 651 Did not Work 73-505-21-137-69 Total 87 686 889 1,144 751 Source: National Statistics Office 5

Table 5. Employment level and generation by class of worker Employment('000) 2005 Jan April July Wage& Salary Workers 16,114 16,293 16,303 Private 13,654 13,788 13,686 Public 2,478 2,505 2,495 Own-Account Workers 11,822 12,300 12,134 Self-employed 10,329 10,739 10,601 Employers 1,493 1,561 1,533 Unpaid Family Workers 3,698 3,623 4,085 Total 31,634 32,216 32,522 Employment Generated('000) Wage& Salary Workers-586 224-408 Private 13,654 13,788 13,686 Public 2,478 2,505 2,495 Own-Account Workers 99 597 746 Self-employed 10,329 10,739 10,601 Employers 1,493 1,561 1,533 Unpaid Family Workers 574-137 552 Total 87 684 890 Source: National Statistics Office Oct 16,552 13,982 2,463 12,157 10,669 1,488 4,168 32,877 144 63 84 518 592 0 482 1,144 2006 Jan 16,212 13,631 2,478 12,085 10,610 1,475 4,087 32,384 98 -23 0 263 281 -18 389 750 This means that many jobless workers are outside the labor force. They join the labor force when job prospects are good and withdraw when prospects are poor. That is why unemployment tends to rise when job creation improves (but is not sufficient to absorb both new entrants as well as re-entrants to the labor force) and falls when job creation deteriorates(as frustrated job seekers leave the labor force). Rising underemployment The surge in underemployment that became evident in 2005 carried over in January this year. Underemployment refers to the number of employed workers desiring additional work. Total underemployment reached 6.9 million in January this year, an increase of 1.8 million in the last 12 months. Thus the underemployment rate rose to 21.3% from 16.1% a year ago. Of the total underemployed, 60.7% were visibly underemployed. Working less than 40 hours a week but 6

wanting additional work hours, they are also referred to as involuntary part-time workers(in contrast to voluntary part-timers who do not want additional work hours). They represent 12.9% of the total employed, a big jump from 9.9% 12 months ago. Invisible underemployment defined as full-time workers wanting more work hours also rose to 7.9% in January from 5.7% the previous year. The resurgence in underemployment is related to the low quality of job creation as evident in the growth in part-time employment in low productivity sectors like farming and retail trade. It reflects the inability of the economy to generate adequate employment of characterized by full-time work and decent pay. Taken together, unemployment and underemployment represent a massive jobs deficit of crisis magnitude. As of January this year, 10.7 million Filipinos were either jobless or underemployed. That is, close to 30% of the country’s 36.2-million strong workforce is looking for work. This does not include men and women who leave the labor force in the absence of clear job prospects. Highlights of Jan 2006 LFS • Net job creation was 750,000, better than the 80,000 posted a year ago. This figure, however, is way below the government’s target of 1.5 million jobs a year. • Of the 750,000 jobs created, 87% were part-time, 52% were unpaid family workers, and 77% were in low-productivity activities, mainly agriculture (63%) and private households(14%). Table 6. Underemployment by major industry Major industry group Jan-06 Apr-06 Philippines Agriculture Industry Services Source: National Statistics Office 6,895 3,256 1,035 2,604 8,421 3,408 1,492 3,521 Oct-06 6,970 3,328 1,037 2,605 Jan-06 6,895 3,256 1,035 2,604 7

• Unemployment(using old official definition) slightly fell to 10.7% or 3.9 M from 11.3% or 4.1 M a year ago. Lower unemployment can be traced to a lower labor force participation rate, indicating jobless workers leaving or not joining the labor force. • Using new official definition, the unemployment rate was 8% but there is no comparable year-ago figure. • Underemployed continued to surge. Total underemployment reached 6.9 million, an increase of 1.8 million in the last 12 months. The underemployment rate rose to 21.3% from 16.1% a year ago. • Of the total underemployed, 60.7% worked parttime. They represent 12.9% of the total employed, up from 9.9% 12 months ago. • Invisible underemployment rose to 7.9% in January from 5.7% the previous year. • Some 10.7 million Filipinos were either jobless or underemployed. Close to 30% of the country’s 36.2-million strong workforce is looking for work Labor Trends is published by the Labor Education and Research Network, Inc (LEARN) in cooperation with the Friedrich Ebert Stiftung(FES)--Philippine Office. LEARN is a non-profit organization providing various services to workers: education, research, publications, gender program, solidarity and networking. LEARN is an affiliate of the International Federation of Workers' Education Associations. Address: 102 Sct de Guia St., Bgy Sacred Heart, Quezon City, Philippines 1103. Email: infomail@learn.org.ph Website: http://www.learn.org.ph. 8