Factory hiring still weak despite higher PMI

DESPITE the strong performance of manufacturing firms in January 2023, Standard & Poors (S&P) Global Market Intelligence noted that hiring activities of Philippine factories “remained weak.”

Based on S&P’S Purchasing Managers’ Index (PMI), the Filipino manufacturers’ output was at 53.5 in January 2023. The PMI was at 53.1 in December 2022.

S&P Global said rising business requirements did not allow manufacturing firms to increase the intake of workers. The seasonally adjusted index edged close to the 50 neutral mark in January.

“[The neutral mark indicates that] only a fractional rise in employment during January. Mentions of layoffs and resignations limited the pace of job creation,"”s&p Global said.

However, close to two-thirds of the panelists in the survey anticipated higher output in the coming 12 months compared to just 1 percent that were downbeat.

“Overall, the continued positive performance of the manufacturing sector in January resulted in higher levels of optimism across surveyed businesses. Improving from a four-month low in December, the degree of confidence was stronger than the historical average,” S&P Global said.

In January, S&P Global said the manufacturing output in the Philippines posted its highest level in seven months and the third consecutive month of growth on the back of strong demand and aggressive monetary policy.

S&P said this performance benefited from cooling inflation with input price and output charge inflation registering the slowest in 24 and 15 months, respectively.

“Overall, strong domestic demand fed into higher optimism for the year ahead. Moreover, the lack of Covid restrictions, greater investment in new products and undertaking new projects aided hopes of a prosperous year for the Filipino manufacturing sector,” S&P Global Market Intelligence economist Maryam Baluch said.

“The data also suggested that the aggressive monetary stance taken by the central bank has been effective as further signs of easing price pressures were recorded in January. Encouragingly, demand has yet to be impacted negatively by policy changes,” she added.

Baluch said there was a sharp increase in output and new orders, suggesting that there is

strong demand for Philippine manufactured goods.

S&P Global noted international client numbers and stronger demand from China helped revive exports for the first time in 11 months.

It added that for the first time in a year, holdings of post-production inventories fell as firms utilized stocks to meet higher new orders.

“Additionally, supply chain pressures also eased further, with panelists citing that improved infrastructure, more vendors and lifting of port restrictions helped with delivery times,” Baluch said.

’Manufacturing could improve’

MEANWHILE, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael Ricafort said the country's manufacturing performance could still improve in the coming months due to the easing of restrictions nationwide.

This will also be supported by the resumption of in-person schooling; accelerated administration of vaccine/booster doses vs. Covid-19; and efforts of the administration to mitigate the adverse economic effects of Russia's invasion/war with Ukraine.

Ricafort added that increasing the capacity of many businesses/industries, including those in manufacturing, would also help further lead to faster recovery in local PMI manufacturing gauges to new prepandemic highs as seen recently.

Earlier in January, preparations for the holidays boosted the country’s employment numbers and brought down unemployment to its lowest level in nearly two decades, according to the Philippine Statistics Authority (PSA).

Based on the results of the Labor Force Survey (LFS), the country’s employment rate reached 95.8 percent in November 2022, reaching 49.71 million employed Filipinos. The unemployment rate slowed to 4.2 percent with 2.18 million unemployed in November 2022.

The employment and unemployment rates were the highest in 17 years or since April 2005, when the government adopted the International Labor Organization’s (ILO’S) employment definitions.

Based on PSA data, new entrants to the labor force increased year on year by 1.24 million in November 2022 and 54,000 compared to October 2022.

Mapa explained that the increase in new entrants and employment as well as the decline in unemployment was driven by Christmas-related activities.

These activities included prechristmas bazaars, midnight sales or night markets and the extension of mall hours, among others that required extra hands.

However, given the seasonality of these developments, Mapa said, this trend may continue only until December but have a slow start in the beginning of 2023. Some firms, Mapa said, may offer more permanent positions to workers, but not all of them will be absorbed.