UNEMPLOYMENT

Yes, there is growth but where are the jobs?

Urgent measures are needed ensure we can turn GDP growth to jobs

In Summary

• While the economy ambles along, the employment situation does not inspire a great load of confidence.

• The number of new jobs created in the formal sector declined by to its lowest point since 2014.

Analysts polled by Reuters expected the unemployment rate to edge up to 25.3 per cent in the first quarter
UNEMPLOYMENT Analysts polled by Reuters expected the unemployment rate to edge up to 25.3 per cent in the first quarter
Image: REUTERS

The Economic Survey 2019 is out. The good news is that our economy, as measured by the GDP, expanded. At 6.3 per cent GDP, Kenya registered the highest GDP growth since 2014. This is 28.5 per cent expansion from 2017 headline GDP numbers.

According to Treasury officials, the expansion in GDP in 2018 was attributed to an uptick in agricultural production which, accounted for 34 per cent of GDP. The contribution of manufacturing declined to 7.7 per cent, the lowest since 2014. The goal is to increase the contribution of manufacturing to GDP to about 15 per cent. Moreover, other sectors, which drive the informal sector such as transportation, food services, retail and repairs have recorded marginal growth.

While the economy ambles along, the employment situation does not inspire a great load of confidence. The number of new jobs created in the formal sector declined by to its lowest point since 2014; only 78,400 jobs were created in 2018. Compared to 2017 job growth declined by a worrying 46 per cent. Similarly, growth in informal declined by 4 per cent compared to 2017.

The economy is growing, by GDP measure, but where are the jobs? Our GDP expansion is attended by the aridity of jobs. While the economy expanded by 28.5 per cent, wage employment in the modern sector only grew by 2.5%; informal sector jobs increased by a paltry 5.4 per cent.

We hit a staggering headwind in the last couple of years. Mumias Sugar Company let go 1,000 employees in 2017; between 2015 and 2017 commercial banks have fired about 5,300 employees, management and non-management. With the collapse of Uchumi and Nakumatt, over 3,500 jobs were lost. Moreover, the decision by Coca Cola to move its Africa operations to South Africa is jobs lost.

For those lucky to hold a job, the going has been tough. There is more month and expenses long after the wages have vaporised. This is because annual real average earnings grew by only 3.2 per cent, while inflation as measured by the Consumer Price Index was 4.7 per cent. Life is tough for a large majority of hard-working Kenyans.

Our revenues measured against our expenditure continues to worry all of us. While ordinary revenues expanded by about 21 per cent, expenditure grew by 17.8 per cent in the 2018/19 fiscal year. Public debt is an enduring concern. About Ksh. 856.6 billion dollars of the estimated Ksh. 1,89 trillion revenues envelop goes to debt servicing. Are we living beyond our means?

We have work to do. Urgent measures are needed ensure we can turn GDP growth to jobs. An important starting point must be to examine the structure of the economy. What really is driving GDP? There are important insights to be gleaned from the level of public spending and the trade deficit. Similarly, our trade deficit says plenty about our output.

We must re-think of our economic growth structure. This jobless trend, along with unbridled a public spending and gigantic trade deficit is not sustainable.