ECONOMIC UPDATE

Corona doubles unemployment rate to 10.4%

According to Worldbank, the pandemic moved many adult Kenyans outside the labor force

In Summary
  • According to the latest Kenya Economic Update by the World bank the unemployment rate in the country still remains more than double its pre Covid-19 level.
  • In the latest household rapid response phone survey (RRPS), the unemployment rate in the country rose sharply and peaked at 21 percent at the beginning of June 2020 .
Unemployed youth hold placards advertising their skills
Unemployed youth hold placards advertising their skills
Image: REUTERS

The rate of joblessness doubled in six months (from April to October) as firms closed down in the wake of the Covid-19 pandemic. 

According to the latest Kenya Economic Update by the World Bank, the unemployment rate rose to 10.4 per cent up from 5.2 per cent in the first three months of the year. 

It peaked in early June at 21 per cent. The Household Rapid Response Phone Survey attributes the jump to limited business activities due to partial lockdown by the government to contain the spread of the virus. 

 

The marked increase in unemployment is also visible in the formal sector administrative data capturing a drop in the number of formal private sector employees filing Pay as You Earn tax returns, the World Bank notes.

"The pandemic moved many adult Kenyans outside the labour force, with the labour force participation rate decreasing from 75 per cent in the last quarter of 2019 to 61 percent from mid-May to early July," the report notes.

This decline is likely due to a subset of workers being discouraged by a lack of available jobs or being unable to actively search for work due to the socioeconomic conditions created by the pandemic.

The largest share of wage workers who lost their jobs were in the services sector, followed by industry and agricultural sectors.

The increase in unemployment, closure of small businesses and closure of schools has, in turn, led to a drop in households’ disposable income thus leading to increased crime.

 

A report tabled in Parliament on the state of national security points to youth unemployment as a major factor in the crime surge.

CBK Governor Patrick Njoroge in May warned that at least 75 per cent small and medium businesses risked closure by end of June due to lack of funds in the wake of Covid-19.

 

This translates to close to eight businesses out of every 10, a situation the CBK governor described as dire and requiring quick interventions for a sector that accounts for 70 per cent of new jobs.

The government moved to create a credit guarantee scheme to cushion the businesses, with a number of tax relief measures to support households and entities during the pandemic.