Statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital―Aaron Levenstein, economist, former business Professor, Baruch college
In this issue
Booming Philippine jobs? A Comprehensive Review of the PSA's October Labor Data Exposed a Dark Secret: Surging Non-Labor Force!
I. The Glorious Headlines: October Unemployment Fell to a Multi-Year low of 4.2% or Employment Rose to a Multi-Year High of 95.8%
II. October’s Unemployment Dropped on a Backdrop of Reduced Labor Force Participation
III. The Skeleton in the Closet of October’s Employment Data: The Spike of the Non-Labor Force Population!
IV. Full-Time Jobs Growth Stalled, Retail Jobs in Decline, Mixed Performance for the Rest
V. The Impact of Slowing Employment Gains on the GDP and Consumer Spending
Booming Philippine jobs? A Comprehensive Review of the PSA's October Labor Data Exposed a Dark Secret: Surging Non-Labor Force!
Statistical Hocus-Pocus? Philippine October employment rates soared to 95.8%—a multi-year high—on the surging non-labor force population!
I. The Glorious Headlines: October Unemployment Fell to a Multi-Year low of 4.2% or Employment Rose to a Multi-Year High of 95.8%
Inquirer.net, December 8, 2023: There were fewer unemployed Filipinos recorded in October as the wealth of seasonal jobs created at the onset of the holiday season started absorbing more workers, including the new entrants to the country’s workforce, the Philippine Statistics Authority (PSA) said in a report on Thursday. A nationwide survey of 44,499 households showed there were 2.09 million Filipinos who were either jobless or out of business in October, down from 2.26 million recorded in September, the report added. That was equivalent to an unemployment rate of 4.2 percent slightly down from 4.5 percent in the previous month…The dip in joblessness coincided with a decline in the number of jobseekers in October. Data showed 49.89 million Filipinos formed part of the nation’s labor force, which represents people age 15 years old and above who actively looked for work during a period. That was smaller than the 49.93 million labor force size recorded in September, but bigger than the 49.30 million posted a year ago. This brought the labor force participation rate to 63.9 percent in October, down from 64.1 percent in the previous month.
Since the Philippine labor force survey plays a crucial role in determining consumer spending, income, and inflation, it represents a critical data source for the calculation of the GDP.
So, one way to amplify the GDP is to bolster the employment numbers.
Nonetheless, as a politically sensitive number, there is no guarantee of the accuracy/objectivity/impartiality of the estimates.
Let us begin with the Philippine Statistics Authority’s (PSA) definitions of the data used here.
1. Population 15 Years Old and Over: This refers to number of population 15 years old and over excluding overseas workers. Overseas workers are excluded in the estimation of the size of working population (population aged 15 years and over) since the data on their economic characteristics are not collected because they are not considered part of the labor force in the country.
2. In the Labor Force or Economically Active Population This refers to persons 15 years old and over who are either employed or unemployed in accordance with the definitions described below.
3. Employed Employed persons include all those who, during the reference period are 15 years old and over as of their last birthday, and are reported either: a. At work, i.e., those who do any work even for one hour during the reference period for pay or profit, or work without pay on the farm or business enterprise operated by a member of the same household related by blood, marriage, or adoption; or b. With a job but not at work, i.e., those who have a job or business but are not at work because of temporary illness or injury, vacation, or other reasons. Likewise, persons who expect to report for work or to start operation of a farm or business enterprise within two weeks from the date of the enumerator’s visit are considered employed.
5. Unemployed…Unemployed persons include all those who, during the reference period, are 15 years old and over as of their last birthday, and reported as persons: a) Without work, i.e., had no job or business during the reference period; b) Currently available for work, i.e., were available and willing to take up work in paid employment or self-employment during the reference period, and/or would be available and willing to take up work in paid employment or self-employment within two weeks after the interview date; and c) Seeking work, i.e., had taken specific steps to look for a job or establish a business during the reference period, or Not seeking work due to the following reasons: (1) fatigued or believed no work available, i.e., discouraged workers; (2) awaiting results of previous job application; (3) temporary illness or disability; (4) bad weather; and/or (5) waiting for rehire or job recall.
6. Persons Not in the Labor Force Persons 15 years old and over who are neither employed nor unemployed according to the definitions mentioned. Those not in the labor force are persons who are not looking for work because of reasons such as housekeeping, schooling, and permanent disability. Examples are housewives, students, persons with disability, or retired persons.
Or, the definitions detail the embedded assumptions of the data set, which serve as our basis for analysis.
II. October’s Unemployment Dropped on a Backdrop of Reduced Labor Force Participation
Figure 1
First. The October unemployment/employment rate of 4.2%/95.8% was similar to November 2022 and represented the lowest/highest since at least 2017. (Figure 1 upper window)
By this assumption, the Philippine economy has been booming even when the 2023 Q2 and Q3 GDP showed a substantial slack in private sector performance. Paradoxical, isn’t it?
Two. The irony is that, unlike in November 2022, the sharp drop in labor participation boosted the employment rate. The labor participation rate was 63.9% in October 2023 compared with 67.5% in November 2022. (Figure 1, lower pane)
Labor participation rate = labor force/employable population (15 years and over).
III. The Skeleton in the Closet of October’s Employment Data: The Spike of the Non-Labor Force Population!
Three. The number of employed people also peaked in November 2022 and has been downhill since. As such, though the employment rate hit the same levels, the number of employed shed by 1.91 million or a decline of 3.83% from 49.71 million in November 2022 to 47.8 million in October 2023.
Figure 2
Four. The population of 15 years and older (employable persons) grew by 1.6% CAGR from 74.73 million in January 2020 to 78.02 million in October 2023. (Figure 2, upper graph)
Put another way, since November 2022, the growth in the number of people employed has barely reflected the demographic expansion.
Fifth. Excluding people looking for jobs (labor force), employment to the (employable) population fell to 61.3%—a one-year low! (Figure 2, lower chart)
Not mentioned in the "Persons not in the labor force" are dependents outside retired individuals, housekeeping, and persons with disability. How about moochers supported by government welfare, OFW remittances, wealthy relatives or sponsors, and others?
Non-labor force = labor force - population of employable (15 years and over)
This segment is a considerable sector, representing 36% of the employable population last October!
Its growth spike since November 2022 has resulted in a sharp decline in labor force participation.
Employment rate = number of employed people/labor force.
Therefore, the decline in the labor force magnified the employment rate.
Unemployment rate = number of unemployed people/labor force.
Transfers of some of the unemployed to the non-labor force sector could have contributed to the decrease in the numerator, hence the decrease in the unemployment rate.
Could this signify statistical legerdemain—a shift from the labor force to the non-labor force—intended to boost the headline employment/unemployment performance?
Or has there been an actual boom in the non-labor force? A boom of dependents?
No mainstream experts or even officials have told us this. Perhaps this represents a taboo in the Overton Window.
Instead, some have used the pretext of "low-quality jobs" or "seasonal workers" to mask the internal decay.
Incredible.
IV. Full-Time Jobs Growth Stalled, Retail Jobs in Decline, Mixed Performance for the Rest
Figure 3
Sixth. After hitting a peak in July 2023, full-time employment growth has stalled while part-time jobs remained a substantial—30%—segment of the overall employment! (Figure 3, topmost chart)
Seventh. The country's biggest employer, the agricultural sector, has been rangebound in 2023, while second-ranked the trade sector has been slightly declining. (Figure 3, middle window)
The worsening employment in the trade sector could signify the erosion of consumer spending conditions.
The second-tier job providers have had mixed performances in 2023 (construction, manufacturing, transportation, public administration, administrative, and hotel and food services). Figure 3 (lowest graph)
Figure 4
The third-tier employers with significant GDP contributions finance, and real estate saw incremental increases over the last few months of 2023. Add the information sector to this. (Figure 4, upper graph)
V. The Impact of Slowing Employment Gains on the GDP and Consumer Spending
Last but not least is the employment data's potential impact on the GDP.
One, employment rates appear to be peaking in the face of the slowing headline GDP. (Figure 4, lower chart)
Figure 5
Two, the decline in "real" consumer spending per capita GDP since Q1 2021 has contradicted the rising employment rates. Or the increase in employment hasn't added to the purchasing capacity of the labor force. (Figure 5, topmost diagram)
Why has the population been gaining jobs but losing their spending power? Sure, inflation represents a critical factor. But why wouldn't businesses and employment suffer from it, too?
Three, the recent plunge in the labor force—due to the surge of non-labor force—could compound the plight of the struggling consumers burdened by inflation. (Figure 5, middle pane)
Too many moochers? Will they further worsen the nation’s dissaving?
In sum, the October headline employment data likely represents a statistical charade.
It disguised the recent surge in the non-labor force sector that diminished the labor force participation rate. In turn, the decline in the labor force magnified the employment rate growth.
In any case, slowing universal commercial bank loan growth has coincided with the peak and the current downturn in nominal employment growth. This should translate to a decaying feedback loop in consumer demand, investment, and employment, which should result in higher credit risks. (Figure 5, lowest chart)
Good luck to those who bought the PSA's employment data as a bullish signal.
