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Labour Market Review - Unemployment soars as recession bites

Recession took its toll on the Nigerian labour market as official unemployment and underemployment rates rose to 13.3% and 19.3% respectively in Q2’16, up from 12.1% and 19.1% in the preceding quarter. Whilst the general upward trend continues to be driven by labour force expansion (1.78% q/q uptick), the markedly higher unemployment rate can be partly attributed to a reduction in the number of people in full-time employment against the previous quarter (down 0.65%). This represented the first decline in full-time employment since the introduction of the new unemployment classifications in 2015, and precipitated a 1.38% y/y fall. The contraction is somewhat expected given the sharp downturn in GDP growth across key sectors during the quarter with the Services sector joining Manufacturing and Oil & Mining (both under Industry) in negative growth territory. It is thus not surprising to see an acute increase in unemployment rate in Urban areas from 15% to 17.8% quarter-on-quarter. Furthermore, underemployment rate of the most qualified workers in the economy (post-secondary education) fell from 19.8% to 17.2% whilst unemployment rate for the same group rose from 15.6% to 23.2%, signifying the deteriorating outlook for workers most likely to be employed in the aforementioned sectors.

There are three prevailing concerns for the labour market. The first is ability of the economy to absorb projected increases in the labour force as a result of higher growth in the working population. On a similar note, persistently high levels of youth unemployment pose further threats to security. Finally, the labour market is unlikely to fare better as long as Nigeria remains in recession. This is highlighted in the August reading of the purchasing managers’ index with Employment Levels in both manufacturing and non-manufacturing sectors recording the lowest figures on record. Nevertheless, effective implementation of the 2016 budget could be a boon. Initiatives targeted at sectors such as Agriculture, Education and Solid mining could improve employment levels. Also, special intervention schemes for low-income earners should have a multiplier effect whilst capital expenditure has the potential to address an infrastructure deficit that shrinks productivity. However, currently strained government revenues continue to douse optimism on fiscal spending and near term recovery of the labour market.