KARACHI: Pakistan’s labour market shows signs of improvement as overall employment growth turned positive and stood at 0.9 percent in July-November FY2021, compared with a contraction of 0.3 percent in the same period last year, according to the central bank’s 2nd quarterly report released on Thursday.
The recovery in employment continued in the first half of this fiscal year, in line with the positive gains in large-scale manufacturing and the services sector.
Employment data for the manufacturing sector of Punjab and Sindh displayed continued improvement, while the SBP’s Business Confidence Survey (BCS) results also reinforced the pattern displayed by manufacturing employment data with an increasing trend for employment index in the industrial sector.
The employment index for Sindh and Punjab based on the data from Monthly Survey of Industrial Production and Employment on the manufacturing sector, shows that employment in Punjab grew by 1.6 percent in July-November FY2021, in contrast to a 3.9 percent contraction in the same period of the preceding fiscal year.
Moreover, the growth in the first two months of the second quarter of FY2021 was 2.3 percent higher over the first quarter. This is due to the increasing level of activity in the industrial sector of Punjab, which grew by 3.8 percent in Q1-FY2021 and 5.0 percent during October-November FY2021.
The SBP’s report said that in Sindh, the manufacturing sector’s employment growth was negative during the review period. Nonetheless, it is important to note two points here. First, the magnitude of contraction has constantly decreased since the start of the current fiscal year.
Second, the negative growth is explained by the loss in employment in the steel industry, which constitutes around eight percent of the total employment reported for the province. The data for the steel industry was not recorded for the months of April-September 2020, and when the reporting resumed, it depicted a negative 97.5 percent growth for the October-November FY2021 period. “The reason behind this reduction could be the layoffs in the Pakistan Steel Mills (PSM), which accounted for the majority of the steel industry data, available in the monthly industrial survey. Excluding the data for the steel industry, employment for Sindh shows an increase of 0.3 percent during the first two months of Q2-FY21,” the report said.
From a sectoral standpoint, cotton textile, which showed negative employment growth during Jul-Nov FY20, recorded 0.4 percent growth during July-November. The pace of growth also improved between Q1 FY21 and Q2 FY21, in line with the pickup in the textile sector growth in the LSM index.
Cotton textile constitutes around 50 percent of the total employment reported for Punjab and Sindh in the Monthly Survey of Industrial Production and Employment; therefore, the improvement in the overall employment numbers is being primarily driven by the growth in this sector. Employment in the sugar industry, meanwhile, also depicted a growth of 12.6 percent; this was mainly due to an early start of the crushing season.
In addition to cotton and sugar, employment in the automobile and pharmaceutical sectors recorded growth during July-November FY2021. The positive developments were consistent with the growth in output of these industries: output of the pharmaceutical and automobile sectors grew by 12.9 and 6.0 percent respectively in the same period. Furthermore, employment in the wheat milling segment also picked up pace in Punjab during the period.
Employment indices taken from the SBP’s BCS reinforce the trends depicted from the industrial data of Sindh and Punjab. In the December 2020 wave of the survey, 50.5 percent of the industrial units reported an increase in employment for the past six months compared to 46.0 percent in the August 2020 wave.
Moreover, the recent wave indicates that industrial firms were optimistic about future increase in employment as well. This may be explained by the positive growth depicted in the LSM sector.
In addition, the BCS reveals that there was a marginal decrease of 0.4 percent in the current employment index for the services sector in December 2020 wave, indicating no significant shift in employment for the underlying period.
The future employment index showed that a majority of businesses (55.1 percent) expected employment to increase in the future. However, a gradual deterioration in the confidence about the future of employment in the services sector was observed between October and December 2020. One reason could be the second wave of Covid-19 in the country.
“However, the future employment index (next six months) is still visibly higher than the April 2020 level, which was the first wave period. This is mainly because, rather than imposing a complete lockdown, the government tackled the second wave by imposing smart and micro lockdowns,” it said.
“Moreover, with the prospective availability of vaccination, unpredictability surrounding the pandemic has somewhat reduced.”
The data for wages shows that the salaries for workers in the pharmaceutical industry increased by 31.3 percent in the first quarter, followed by 7.1 percent growth in October-November FY2021. This can be attributed to a surge in demand for medical supplies because of the ongoing pandemic, which in turn led to an increase in the demand for labour in the industry.