Local firms continue cutting jobs despite rebounding economy

Kenya’s private sector has continued shedding jobs in spite of an improving macro-economic environment supported by an ease of COVID-19 restrictions.

While private sector activity marked positive growth in August with the Stanbic Bank Purchasing Managers Index (PMI) standing at 53 points indicating expansion, the employment index remained on a negative trend.

Moreover, the rate of job shedding in the month was the quickest since May as employers seemingly sacrificed their workforce to strengthen profits.

“Employment continued to fall in August reflecting concerns that costs remained too high,” noted the Stanbic monthly survey published on Thursday.

The continued job shedding saw staff costs decline for a fifth straight month along with the observed job shedding with firms taking a costs conservation stance.

Stanbic Bank Head of Research for Africa Jibran Qureishi said the continued job cuts are indicative of prevailing uncertainties in the direction of the economy in spite of a business rebound across the past two months.

“The employment subcomponent index still remains below the 50 level, largely reflecting firms scaling back on wage costs. Weaker jobs growth indicates the underlying challenges the road ahead presents, even as business confidence has improved over the past two months,” he said.

The employment trend further casts a grim picture of employment in Kenya and comes barely days after the Kenya National Bureau of Statistics (KNBS) published its second quarter labour force print which revealed the loss of another 1.7 million jobs between April and June.

Private sector activity was however on the expansion for the second straight month as the lift to restrictions lifted the demand for goods and services.

“Kenyan firms reported a sharp up turn in new orders during the month as the easing of COVID-19 restrictions led to rising customer demand,” added the survey.

The re-opening of international travel for instance saw export sales rise to their highest on record as key destinations such as Europe marked a strong rebound in demand.

Purchasing activity by firms was also on the rise as businesses built up stocks in anticipation of demand.

Greater output which further drew support from higher customer turnouts saw work backlogs increase with companies struggling to keep up with customer demand.

Subsequently, business expectations improved for the first time in six months with plans on new investments and branches. Overall sentiments however remained subdued from the record highs seen at the start of the year.