The Philippines’ unemployment rate hit a post-pandemic high of 6.0 percent in July, signaling that the slowing economy may be struggling to absorb new workers as growth remains weighed down by the flood control scandal, according to former Bangko Sentral ng Pilipinas officials Diwa Guinigundo and Wilhemina Mañalac.

In a recent commentary, the economists said the July employment figures should serve as a “warning” that the economy is losing momentum as growth slows and inflation remains elevated amid a combination of domestic and external pressures. They noted, however, that the economy has not yet reached recession.

“The Philippine economy is growing, but at a pace that may no longer be sufficient to comfortably absorb a rising labor force. GDP growth has slowed sharply, investment has contracted, employment quality remains an issue, and inflation remains elevated," they said.

“The emerging picture is consequently not one of outright recession. It is more subtle, and perhaps more challenging: an economy losing momentum while inflation remains uncomfortably high, with the labor market beginning to feel the strain,” they said.

Philippine Statistics Authority (PSA) data showed that the July jobless rate was the highest since the 6.03 percent recorded in June 2022. The number of unemployed Filipinos also reached its highest level since December 2021, when 3.28 million people were without work.

“Of the 3.14 million unemployed Filipinos, a substantial proportion are young people. Meanwhile, 6.33 million employed Filipinos remained underemployed, meaning they wanted additional hours, another job, or a job with longer working hours. The underemployment rate was 12.9 percent, better than the 14.8 percent recorded a year earlier but still significant,” the economists said.

Guinigundo and Mañalac said the unemployment figures should be viewed against the broader economic slowdown, with growth settling at 2.3 percent in the second quarter and inflation accelerating to 6.0 percent in August.

“A slowdown in output does not immediately translate into higher unemployment because firms normally adjust hours, overtime and hiring before they resort to outright layoffs. But when weaker demand persists, employment eventually becomes part of the adjustment,” they said.

“The issue is not simply whether workers possess the right skills. It is also whether businesses have sufficient demand, confidence and investment incentives to hire them.”

The economists said the combination of heightened unemployment, elevated inflation and weak growth has created a “challenging environment” for policymakers in the months ahead. While the economy has shown pockets of resilience, particularly in manufacturing, they said the July unemployment figures warrant caution.

“If the rise in unemployment persists into August and September, it would strengthen the case that the second-quarter slowdown was not merely a temporary statistical episode but the beginning of a broader weakening in economic activity. Conversely, a rebound in employment, hours worked, investment and consumption would suggest that the July deterioration was temporary,” they said.

“The ultimate test of economic performance is not simply how fast GDP grows on paper. It is whether that growth creates enough productive opportunities for Filipinos who are willing and able to work,” they added.