Kenya hit by jobs slowdown for the first time in 4 years

The Kenyan economy lost its job creation momentum for the first time in four years, even as large numbers of previously employed individuals joined the labour market in wake of staff retrenchments that dominated Corporate Kenya in 2016.

Official data released yesterday shows that the economy created 832,900 new formal and informal sector jobs in 2016, down from 841,600 a year earlier.

It was the first time the economy has spun fewer jobs in a year since the Jubilee government came to power in 2013.

“The number of new jobs created decelerated in the review period,” said Zachary Mwangi, the director-general at the Kenya National Bureau of Statistics (KNBS).

The outcome has pulled President Uhuru Kenyatta’s government further from its target of minting one million jobs a year, as promised in his Jubilee coalition’s 2013 election manifesto.

The economy’s jobs creation momentum has grown steadily from 750,000 four years ago to nearly one million in 2015, before declining to last year’s 832,900.

The labour market squeeze came despite the economy growing at a robust rate of 5.8 per cent compared to 5.7 per cent in 2015 – once again creating the impression of a jobless growth.

The labour market squeeze came despite the economy growing at a robust rate of 5.8 per cent compared to 5.7 per cent in 2015 – once again creating the impression of a jobless growth.

Formal sector jobs lowest

The new formal sector jobs were also the lowest since the Jubilee government came to office in 2013, an outcome that speaks to the quality of jobs created in the period.

Formal jobs added to the economy last year narrowed by a third from 128,000 in 2015 and 134,200 in 2013, data from the Economic Survey 2017, done by KNBS, shows.

The slowdown in creation of new formal sector jobs is set to pile pressure on households as the few people with regular wages have to continue supporting a large number of dependents some of who have finished college but cannot find employment.

A World Bank report released last March showed that Kenya has the largest number of unemployed youth in East Africa at the rate of 17.3 per cent compared to six per cent for both Uganda and Tanzania.

The KNBS survey shows that the private sector accounted for 67.2 per cent of the 85,600 new formal jobs created last year or 57,600 new positions, down from 90,200 a year earlier.

The slowdown has been blamed on a tough economic climate that saw hundreds of formal sector workers lose jobs in retrenchments.

Besides, a freeze in public sector hiring limited wage employment to a paltry 2.6 per cent growth.

The survey found that the economy minted 747,300 informal sector jobs in the review period, accounting for 89.7 per cent of total new jobs, down from 713,600 in 2015.

Construction mints most jobs

The construction sector, which grew 9.2 per cent last year, emerged as the biggest jobs creation machine, having churned out 14,800 new formal jobs.

This was attributed to heavy government investment in infrastructure projects, including the standard gauge railway, roads and energy.

Education and retail sectors tied in the second position with 7,800 new jobs each, while manufacturing sector, which expanded 3.5 per cent, generated 5,300 new formal jobs.

Public sector salaries remain higher than private sector pay, with government employees earning an average of Sh56,923 per month compared to the private sector’s Sh52,443.

Average annual inflation stood at 6.3 per cent last year while the overall average annual formal sector earnings grew 5.9 per cent from Sh608,991 to Sh644,837 last year, leaving the workers worse off when their pay is adjusted for inflation.

Overall, some 16 million people were in employment last year, out of which 13.3 million were in the informal sector and 2.6 million in formal employment.

Total wage bill hit Sh1.6 trillion from Sh1.5 trillion.

The survey also found that the Kenyan economy expanded at the rate of 5.8 per cent despite a slowdown in key sectors.

Growth in agriculture, which accounted for 32.6 per cent of the gross domestic product (GDP) last year, slowed to 4.0 per cent from 5.5 per cent the previous year while construction slowed down to 9.2 per cent from 13.9 per cent.

Tourism up

Tourism was, however, a bright spot, expanding 13.3 per cent from a contraction of 1.3 per cent the year before and earning the country Sh99.7 billion up from Sh84.5 billion in 2015.

Manufacturing, which accounts for 9.2 per cent of the GDP, slowed down to 3.5 per cent from 3.6 per cent while financial services decelerated from 9.4 per cent in 2015 to 6.9 per cent last year.




Source: Business Daily