OGUTU: Unemployment data ought to be keenly monitored

Recently released Economic Survey 2019 offers insights on employment in the country. Overall employment grew by 5.0 percent year-n-year to 17.8 million in 2018. However, this was evenly spread out with the informal sector which accounts for the lion proportion of the employed (83.6 percent) grew by 5.4 percent year on year to 14.9 million while the formal sector grew by 2.4 percent year on year to 2.8 million.

This by itself points to the significance of the informal sector, particularly on trade and hospitality sectors, in the overall economy. Poring through formal sector, private sector employment is skewed towards agriculture, manufacturing and trade while education and public administration dominate the bulk of public sector employment.

Average wage earnings in the formal sector grew 7.6 per cent annually and the growth was equally balanced between private and public employment, with the average annual earnings at Sh727,000 or an equivalent of Sh60,600 monthly pay.

On aggregate wages per sector, education takes the lion share at 22.4 per cent of the estimated Sh2.0 trillion in total wage payments last year. This is hardly surprising considering that formal employment in the education sector is quite significant at 577,000 and spread across the 94,400 learning institutions.

However, I would like to stress the converse from the employment indicator, the unemployment pulse. The latest labour report was released early last year with some of the key points being unemployment rate at 7.4 percent and employment-to-population rate at 71.6 per cent. However, this report was based on 2015/16 household survey and from historical trends, the next labour statistics report will be based on 2025/26 household survey.

Why would a decade pass for the next comprehensive unemployment statistics, one may ask? I offer a possible answer derived from our monetary policy framework. Unlike the US Federal Reserve which has a dual mandate of price stability and maximising employment, the Central Bank of Kenya has a sole mandate focused on price stability. Thus in the US, we have labour indicators running the gamut from highly market-anticipated non-farm payrolls and unemployment rate on a monthly basis to the annual employment projections. These statistics are thus factored in monetary policy decisions by the US apex bank.

Locally, the employment indicator released with high frequency is the employment sub-index, which accounts for 20 percent of the headline Purchasing Managers Index (PMI) which has been tracked on a monthly basis since January 2014. The overall PMI is a pulse of the private sector and a print above 50 indicates expansion activities while a print below 50 shows contraction.

As at April, the PMI print pointed to a contraction at 49.3, with employment sub-index posting the first monthly decline since November 2017. The role of the private sector in the economy, which contributes an approximate 70 percent to the overall consumption, cannot be gainsaid and a negative knock on a labour absorption is detrimental to the overall economy.

The government has fell short of articulating well its policy towards employment. The Big Four agenda to be implemented in the current second-term Jubilee government has an emphasis towards creating jobs, if the front page of the annual Budget Policy Statements carries much weight.

However, there seems to be no clear strategy towards realizing the goal for instance of creating 800,000 jobs in the manufacturing sector.

Granted, there are set goals of creating 500,000 and 200,000 jobs in the cotton sector and apparel industries, respectively, but this are mainly labour-intensive jobs thus growth is expected organically in the event other pre-requisite factors of production are in place. Nonetheless, that end goal remains unjustified by the means if you closely scrutinise the Big Four strategy.

Not all is lost, however, and the approach towards labour data can be remedied in two ways.

Firstly, there has been emphasis on National Integrated Identity Management System (NIIMS) or Huduma Namba mass registration. However, uncertainty abounds to the overall utility of the eventual Huduma Namba which is towards integrating multiple identity cards currently in place.

There have also been legitimate questions as to how dynamic is the NIIMS framework. For instance, how will an under-age high school student in possession of the Huduma Namba have his or her record updated upon attaining an ID card?

To remain within the ambit of this piece, how dynamic is NIIMS such that an unemployed Kenyan upon registering will have his or her records updated upon being attained. I believe the Huduma Namba registration is a good starting point on the quantum of the unemployed in Kenya.

Secondly, it is puzzling that National Employment Authority is being launched in May 2019. This stems from the fact that the authority was formally established by an Act of Parliament three years ago with an overarching aim of providing a platform for the youth and marginalizsed groups to access employment.

The authority is also mandated to maintain a database of Kenyans seeking employment. That the authority has been the best kept secret is an open secret and the upcoming ‘launch’ is set to sensitise the public on its mandate.

There lies an opportunity of maintaining unemployed database and derive strategies towards improved employment access.

The writer is the Senior Research Analyst at Gengis Capital covering macro-economics and fixed income.