January 8th, 2022
The jobs and prices reports reflect what we have already observed for the past several months: When the economy is able to operate at a higher capacity, jobs are created and prices stabilize. If we want jobs to return and the price situation to improve, we have to do what we can to keep the economy open.
Although in my view, actual job creation remains fluid, the most significant number in the November 2021 survey is that more people have decided to take part in the labor force than at any other time in 2021. That is a positive sign of the growing confidence and the growing need of our workers to rejoin work.
The national joblessness rate is also down to 6.5%, from 7.4% last month. The October to November period saw an increase in jobs by 1.651 million. I would attribute some seasonality to this, and predict that, if the Omicron variant causes an overreaction and as the Christmas season effects fade, we may see unemployment return to 7.0% by January 2021. Jobs are being created, but they are not yet very durable jobs. We will only see more concrete jobs recovery once the COVID overhang is resolved and people are no longer speculating whether more stringent restrictions will be implemented in the future.
On underemployment: Because more people are seeking work, more people will also be unable to find enough work. This is the underlying reason for higher underemployment.
On prices, the 4th quarter of 2021 is also the most open the economy ever was during the year. Hence, inflation was also the slowest in December than at any other time in 2021. As we have repeatedly emphasized, the problem of prices this year is on the supply-side. People cannot go to work, and therefore cannot produce, process, or transport enough goods to catch up to now-recovering demand. As a result of more economic activity, the country’s headline inflation slowed to 3.6 percent in December 2021, from 4.2 percent in November 2021.
I also note that the two regions in our watchlist – Bicol and Cagayan Valley – now see slower inflation. Bicol is not at the national average of 3.6 percent, while Cagayan Valley is at 2.4 percent. As we suggested last month, as these regions dropped their border restrictions, prices also stabilized.
We are instead noting inflation in two regions: Davao and Zamboanga. These are regions whose supply rely heavily on their neighbors, which were ravaged by Typhoon Odette. I expect some of the price trend in these areas to spill over to January 2022, until ports and airports in the South are restored to full capacity. Food prices also grew the fastest in these two regions.
These price developments, if anything, tell us that infrastructure – especially infrastructure that supports food systems – remain a key driver of prices and food availability. The Duterte administration has made great strides in resolving the dearth of food-supportive infrastructure, but we need to continue a Build, Build, Build for food systems regardless of who becomes the next President.
My recommendations for job recovery and price stabilization are as follows:
(end)