Sri Lanka creates jobs in 2Q as unemployment rate falls from 1Q

• 2Q unemployment rate down to 5.4% from 5.7 in 1Q
• Labour force participation rate down to 50.2% from 51% in 1Q

Sri Lankan businesses added jobs at a faster pace in May through June, signaling a recovery in the job market from the temporary downturn caused by the coronavirus-induced lockdowns and the resultant business closures. 

Sri Lanka’s unemployment rate fell to 5.4 percent by the end of the second quarter from 5.7 percent in the first quarter as employers recalled laid off workers and created new opening for others as they ramped up production to meet both the domestic and foreign demand no sooner the lockdowns were eased. 

Sri Lanka lost close to 72,000 jobs during the first quarter as companies suspended work and sent their staff home as the country was in lockdown from the third week of March to control the new coronavirus spread. By end-March there were 483,172 unemployed persons in total compared to 411,318 persons by the end of 2019 when the jobless rate was 4.8 percent, demonstrating that the job market still has room to recover to its pre-pandemic levels by end-June. 

Economists and analysts earlier predicted a higher single digit unemployment rate for Sri Lanka through 2020 as few expected economic activities to rebound faster after the lockdowns were lifted. 

The Purchasing Managers Index data for every month from May showed continuous increases in the employment category, particularly under manufacturing and the most recent report for August said some employers having recruited new employees are anticipating the upcoming seasonal demand. 

While part of employees has been recalled since the opening of hotels and resorts for local visitors since June, there is still a section of employees in the tourism sector who remain unemployed as the country is still closed for foreign travellers. 

Travel and tourism remains the worst hit sector from the pandemic. 

Meanwhile, the labour force participation rate declined to 50.2 percent in the second quarter of 2020 from 51 percent in the first of quarter of 2020. This was 51.9 percent in the fourth quarter of 2019.

The labour force participation rate measures the economically active workforce, which consists of all currently employed workers and the ones actively seeking employment outside home. 
A lower rate is not a good sign as 50.2 percent suggests that almost half of the working age population are either not working or have given up looking for work due to lack of opportunity. 

However, the current renaissance in all three sectors of the economy—agriculture, industrial and services— could be able to provide opportunities for those who come out of universities and vocational training institutes.