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‘Unemployment Rate Data Downplays Labour Market Condition’

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'Unemployment Rate Data Downplays Labour Market Condition'
Chris Ngige - Minister of Labour and Employment

‘Unemployment Rate Data Downplays Labour Market Condition’

Afrinvest, a leading investment firm headquartered in Lagos has said it discovered that underlying numbers suggest that the labour market is in a worse state than the headline unemployment rate would suggest.

Last week, the Nigerian Bureau of Statistics (NBS) published second quarter (Q2) 2020 labour statistics, which happened to the first report since third quarter (Q3) 2018.

In a macroeconomic note, Afrinvest said as expected, the numbers are grim as unemployment rate climbed to 27.1%.

Afrinvest said the abridged nature of the report raises a lot of questions about the changes the investment firm noticed.

'Unemployment Rate Data Downplays Labour Market Condition'
Chris Ngige – Minister of Labour and Employment

“We have previously noted that the lack of timely labour data made it difficult to assess the health of the labour market and measure the impact of government policies targeted at creating jobs”, Afrinvest stated.

Explaining further, the investment firm said it concerns have only slightly eased as labour data between Q4:2018 and Q1:2020 remain outstanding despite the recent update.

“This means we cannot conduct a trend analysis to better understand and explain what happened in the labour market between Q3:2018 and Q2:2020”, the firm remarked.

It explained that the social distancing measures taken to fight COVID-19 also hurt data collection, especially given large informal sector activity and without real time tracking of those in unemployment with alternative methods such as social security enrolment.

As a result, Afrinvest recognised that the National Bureau of Statistics made changes to its methodology in Q2:2020.

Some of these changes made by NBS, as Afrinvest noted include the use of the Computer Assisted Telephone Interview (CATI) method to conduct the survey as against the use of telephone surveys in the past while the sample size of the households under coverage was reduced.

The report shows that unemployment rate rose to 27.1% in Q2:2020 from 23.1% in Q3:2018 while underemployment rate increased to 28.6% from 20.1%.

Afrinvest said this is the worst performance on record since the reporting of quarterly data began in 2010.

“We are surprised by the reduction in the size of the labour force by 10.2 million to 80.3 million between Q3:2018 and Q2:2020 as this is the only decline on record.

“This implies that a large number of people of employment age were not interested in working.

“The decline was mainly driven by the reduction in the number of male persons available to work by 16.3% to 41.7 million while labour force population in the rural area was down 19.1% to 51.8 million.

“The reason for the decline is unclear. More worrying is the 0.7% annualised increase in the size of the economically active population to 116.9 million, which is lower than the historical growth of 3.3% yearly”, the firm explained.

However, Afrinvest said it noted the steep decline in the number of fully employed people to 35.6 million from 51.3 million in Q3:2018 and the peak level of 55.7 million in Q1:2015.

The total number of employed, including underemployed, also fell sharply to 58.5 million from 69.5 million.

Furthermore, the report noted the continuous rise in youth (15 – 34 years old) unemployment rate to 34.9% from 29.7%, while the rate of underemployment rose to 28.2% from 25.7%.

Analysts observed that the trend in youth unemployment and underemployment is the worst of all age groups despite benefitting from government’s targeted employment programmes.

Overall the Q2:2020 unemployment report shows that the labour market has worsened in the past seven quarters, the firm stated.

Afrinvest said the sharp moderation in the size of people in employment and in full-time employment raise concerns about growth prospects, especially as labour productivity growth is poor.

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“We reiterate that reforms that open sectors to investment and strong economic growth are crucial to creating jobs and slowing the pace of unemployment”, Afrinvest said.

‘Unemployment Rate Data Downplays Labour Market Condition’

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