Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said changes in the labor market brought on by the public health crisis will continue to drive wage dynamics in the near term, and it will require extra vigilance in monitoring its impact on inflation.
“For this reason, the BSP will continue to be vigilant on the evolving wage dynamics and its ability to influence the rate of increase of prices,” said Diokno on Thursday. “In addition, we will continue to maintain the accommodative monetary policy measures, as long as necessary, to further allow a faster and sustained recovery of the economy while achieving our price and financial stability goals.”
Diokno said it is crucial that the monthly release of selected labor market statistics by the Philippine Statistics Authority continues, and that the Labor Force Survey or LFS “allows (BSP) to better examine the recovery in the labor market post-pandemic.”
“Given the relationship between wage dynamics and inflation, the BSP continues to monitor minimum wage increases and other changes in wage dynamics at any given time,” said Diokno. A wage increase is a demand-driven price pressure and is carefully monitored by the BSP.
Diokno said BSP’s inflation targeting framework has the flexibility to support employment and output growth objectives, while giving priority to the inflation mandate, particularly when the inflation outlook is manageable and the government inflation target is not at risk.
“The BSP’s long-standing focus on its inflation mandate allows monetary policy to support growth and employment over the long run by reducing inflation variability and economic uncertainty. Equally important, the BSP’s publicly-communicated focus on its inflation mandate contributes to the clarity, understandability, and effectiveness of monetary policy decision-making,” he said.
Diokno said the “low and stable inflation” as well as the “calibrated wage adjustments over the past few years” is a result of both the BSP and the wage boards’ “steady” collaboration.
COVID-19 had a direct impact on the economy since the lockdowns resulted to job losses, among others. While unemployment and underemployment are decreasing with the slow reopening of economic activities, Diokno said there is more to improve as far as labor market conditions are concerned. The pandemic has had a large impact on the labor market due to reduced face-to-face interactions in industries, the increase in the use of digitalization and automation of jobs.
At the start of the pandemic in 2020, the country’s unemployment rate peaked at 17.6 percent. By April this year, unemployment rate improved to 8.7 percent.
“While the recent numbers show that 4.1 million Filipinos remain jobless, we are encouraged by the rising labor force participation and improvements in economic conditions that enabled millions of Filipinos to regain their jobs and incomes in April 2021,” said Diokno, adding that with the “recovery of the economy after the lockdown measures were relaxed in mid-2020, 9.5 million jobs have been generated as of April 2021, more than offsetting the 8.7 million jobs that were lost in the period March to May 2020. This translated to a net job creation of 800,000 jobs. The decline compared to last month may be attributed to the re-imposition of the lockdowns in NCR+, which affected a substantial proportion of employment in these areas.”
Diokno said the results of the new monthly LFS is a more timely data that will assist the BSP in its monetary policy setting. It will also show whether government measures “are gaining traction and how the labor market is responding to changing economic condition.”
As such, Diokno said the BSP support several initiatives and government programs such as the distribution of the P22.9 billion supplemental social amelioration program for 22.9 million individuals in the NCR+. The BSP also support the implementation of the Prevent, Detect, Isolate, Treat, and Recover strategy to reduce COVID-19 cases.