Firms resume hiring for first time in months jobless

Jobseekers queue to submit their applications. FILE PHOTO | NMG

By CONSTANT MUNDA
More by this Author

Summary

• The increased corporate activity has been buoyed by more firms resuming operations and others increasing factory floor activities after the easing of some restrictions imposed to stem the spread of Covid-19.
• About 1.72 million workers lost jobs in the three months to June when Kenya imposed coronavirus-induced lockdowns that led to layoffs and pay cuts as firms battled falling sales and losses.
• The resumption in hiring is a major boost to jobseekers, especially the close to one million young people who graduate from various educational institutions every year.

Kenyan firms last month stopped layoffs and raised the number of workers on their payroll for the first time since February in a bid to meet rising demand for goods and services locally and abroad on relaxation of trade and travel curbs.

Findings of the Stanbic Bank Kenya’s Purchasing Managers Index (PMI) survey show output and new orders at Kenyan private companies expanded at the fastest pace in the study’s history dating back to January 2014.

Panelists polled in the closely watched monthly survey said growth in production for the fourth month in a row, which spurred fresh hiring, was largely being driven by improved cash circulation amid re-opening of businesses and schools.

The increased corporate activity has been buoyed by more firms resuming operations and others increasing factory floor activities after the easing of some restrictions imposed to stem the spread of Covid-19.

About 1.72 million workers lost jobs in the three months to June when Kenya imposed coronavirus-induced lockdowns that led to layoffs and pay cuts as firms battled falling sales and losses.

The resumption in hiring is a major boost to jobseekers, especially the close to one million young people who graduate from various educational institutions every year.

“Rising output and order book volumes led companies to raise their staffing levels at the start of the fourth quarter, ending a seven-month sequence of job cuts. The rate of job creation was the strongest in 11 months,” analysts at Stanbic Bank and UK’s Markit wrote in the PMI report.

The overall headline PMI reading— a monthly measure of private sector activity such as output, new orders, employment and backlogs — came in at 59.1 in October compared with 56.3 a month earlier, marking a record in the survey’s history.

Readings above 50 denote growth while those below point to contraction in activity in private companies.

Activity in the private sector has gathered momentum since Kenya started gradual re-opening of the economy in June, a turnaround from a steady contraction in the first six months of the year.

Companies were already struggling with flagging sales even before the Covid-induced travel and trade restrictions were imposed in late March, exacerbating job losses from April.

“Business confidence has been on the rise over the last couple of months, courtesy of easing domestic containment measures which has boosted demand, albeit from a low base from April/May,” Stanbic Bank head of Africa research Jibran Qureishi wrote in the report.

“That being said, with lockdowns being reimposed in some major international trading partners (such as the UK), new orders could ease over the coming months especially if external demand falters.”

The central bank expects the economy to expand by 3.1 percent this year, reflecting the growing optimism from businesses.

The Treasury, however, expects growth of less than 2.5 percent, while the International Monetary Fund projects a contraction of -0.27 percent for the year.

Kenya has 58,567 confirmed cases of the Covid-19 from 38,713 in October 5, reflecting a 51 percent growth. Fatalities have increased to 1,051 from 718 a month ago.

But faced with an economy that shrank by 5.7 percent in the three months to June when business shut and people stayed at home, Mr Kenyatta yesterday resisted the pressure to impose stiffer restrictions.

Young people were the hardest hit by job cuts compared to their counterparts aged above 35 years in an economic setting that is plagued by a hiring freeze on the back of sluggish corporate earnings.

Workers aged between 20 and 29 accounted for 1,158,466 or 63 percent of the lost jobs.

Those between the ages of 35 and legal retirement age of 50 accounted for 312,316 or 17 percent of the lost jobs.

This is an indication that corporate Kenya was keen to keep experienced staff on their payroll and also points to creating redundancies at the minimal costs to firms struggling to preserve cash amid a plunge in sales.

The number of formal jobs generated by the economy fell to a seven-year low in 2019.

The economy generated only 78,400 new formal jobs last year, but informal jobs rose from 744,000 in 2018 to 767,900 last year.

Figures for this year will be hit by the effects of the coronavirus pandemic.