Lahore: Investors currently have very limited visibility into the future and a great degree of uncertainty, so they just want to sit steady on investment plans and are conservative in hiring.
Many companies are imposing hiring freezes, and vacant positions are not being filled by them.
This is the reason that unemployment in the country has increased sharply both due to reduced creation of new jobs and retrenchments by industries and firms on account of recession. It is time that the planners come up with distinct policy strategies for reducing unemployment.
Businesses and entrepreneurs have cut back on investment, so they have been creating fewer jobs.
If job creation had remained stable during the past two years, two million net jobs would have been created despite a higher number of employees getting laid off.
Such moves do not often get the kind of headlines that layoffs do, but because they shrink the number of places people can turn to for jobs, they still hurt the economy and employment scenario.
Layoffs have increased noticeably over the past four years and a half. The main reason unemployment rises during economic downturns is that job creation falls while the labour force continues to grow, making available jobs scarcer.
It is a drop in job creation, not a rise in job losses that accounts for the majority of unemployment increases during recessions. In vibrant economies, industries continually expand and contract while entrepreneurs create new companies and non-competitive firms go out of business.
Workers move between jobs frequently as this occurs. In good times and bad, the number of jobs created or lost each in each period is the difference between the number of workers starting new jobs and the number of workers leaving old ones.
Changes in either job-loss or job-creation rates affect unemployment. Unemployment obviously rises when employees leave their jobs--either voluntarily or involuntarily--directly increasing the number of job seekers.
But unemployment also rises when job creation falls. The governments that adopt populist policies during recessions further dampen the will of entrepreneurs to create new jobs.
It is essential that the governments utilise available resources prudently when the economy is in distress.
Recession is always more pronounced in countries where the resources are misused or spent in the wrong direction.
Currently, businesses are retrenching wherever they can. While taking measures to survive the immediate downturn, such as laying off workers, and conserving cash, businesses have also grown wary about the future of the economy.
The labour market has been weak for the past two years. By ignoring the distress of the companies that were gradually cutting down jobs in order to trim their costs for survival, the government has brought the situation to a level where deterioration of the job market is now emerging as a driver of economic distress.
Jobs had been shrinking in the construction and manufacturing sectors for the past two and a half years. But now the job losses have started impacting the services sector as well.
Companies are slashing temporary jobs. Leisure and hospitality industry has cut jobs too because of a decline in domestic tourism. This has brought on many miseries for the people living in the northern parts of the country, where the economic activity is driven by tourism.
Moreover, people are insecure about
their current jobs even if they are still employed. They are now willing to work extra hours and to take on additional duties to enhance job security and improve their employability.