Sri Lanka’s years-long labour market weakness persists as firms still shed staff

Despite some strength reflected by the official jobless rates, Sri Lanka’s labour market remains still a lot weaker before both the economic crisis and the pandemic as industries and companies are still either cutting staff or have frozen fresh hiring.
According to a monthly survey conducted by the Central Bank on both manufacturing and services firms, they have witnessed contractions in employment levels at both in December, reflecting lingering weakness and fragility in the country’s labour market.

Manufacturing which has long been reeling from the crisis since 2022 saw a prolonged shrinkage in the number of people working before the sector started rehiring in November.
Despite the expectations for it to sustain, it didn’t last long as December saw the sector had been letting its staff go again, putting pressure back on the people who were either unemployed for months or years but looking for work.

It also suggests that the nascent recovery in the economy which set off from the third quarter last year hasn’t fully translated into restoring lost jobs and pulling people out of the sidelines.
The December contraction in employment has been in fact led by the decline in the manufacturing of textiles and apparels as the sector is undergoing some slowdown for little over a year due to the softening demand conditions in the West.

 However, if it is going to be limited to that particular industry or it is going to be more broad based is yet to be seen.
The construction sector said recently that it hadn’t yet begun to add staff and in fact they cut staff in December as the sector is yet to see some meaningful and sustained turnaround from over two years of contraction.

“Employment continued to contract as the companies tend to operate with minimum staff under the current industry situation”, a statement on the construction sector purchasing Managers’ Index said in late December about their November conditions which saw the industry shrinking again after returning to a brief neutral level in October. Meanwhile the services sector which showed some resilience compared to manufacturing and added staff in most months saw that they were shedding staff in December.

If it was a one off development or it was going to be the beginning of a months-long trend is only known when the January data is out.
In any case Sri Lanka’s key industries lost some large number of key talent during the last three years and it is likely that the pace is going to continue for few years as opportunities remain still lot less while the people are getting hammered by elevated cost of living and never ending taxes under the ongoing International Monetary Fund programme.