Sri Lanka’s unemployment rate steadily rose during the 12 months to September 2019 to hit a four-year high of 5.1 percent from 4.9 percent in June 2019 and 4.1 percent in September 2018 as the businesses froze new recruitments in a slowing economy.
As usual, the females led the pack with the female unemployment rate hitting 8.5 percent. The unemployment rate among the males was 3.3 percent.
An unemployment rate around 4.0 percent is typically considered as near-full employment in an economy and anything below that could also put pressure on prices and put a dampener on economic growth.
This is because businesses are unable to find people for expansion or to fill vacancies and often having to pay higher wages to attract talent.
This condition could fuel wage-driven inflation and the economy slows naturally amid businesses failing to expand their operations.
While the employment rate has gradually surpassed the 5.0 percent level during the last few quarters, Sri Lanka’s growth has to a large extent maimed by the near-full employment in the recent past.
Further, there is also a larger population that is under-employed. This is the segment whose skills are underused to his or her abilities. Hence under-employment is as bad as unemployment because productivity suffers.
Currently there are 437,797 unemployed persons. Sri Lanka had a labour force or an economically-active population of 8.6 million by end 3Q19, out of which only 52.2 percent is employed, down from 52.6 percent in 2Q19 but up from 51.8 percent in 3Q18.
Meanwhile, the distribution of employed person across the three major economic sectors showed 25.3 percent or little under 2.1 million engaged in agriculture while 27 percent or 2.2 million people engaged in industry sector.
Further 47.7 percent or 3.89 million persons are employed in the services sector.
Sri Lanka’s employment distribution is lopsided across the three sectors relative to their contribution to the overall size of the economy.
For instance 25.3 percent of the employed persons in the agriculture sector contribute only less than 10 percent to the economy, indicating a very high level of income imbalance in the sector.