Philippine Job Creation Lags Behind Rising Labor Force, Analysts Say

The unemployment rate in the Philippines rose to 4.9% in June 2026 as a significant number of new workers entered the labor force, but analysts warn that weak economic growth and declining investment are hindering the economy’s ability to generate sufficient jobs to absorb this influx. The Philippine Statistics Authority (PSA) reported that about 650,000 Filipinos sought to join the workforce for the first time in June, yet only approximately 310,000 secured employment during the same period. Meanwhile, the underemployment rate increased to 12.1% from 11.4% a year earlier, indicating that many employed workers still seek additional hours or jobs.

Economic growth slowed to 2.3% in the second quarter of 2026, down from 5.4% in the same quarter of the previous year and 2.8% in the first quarter of 2026. Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms, attributed the economy’s inability to absorb new labor force entrants partly to this slowdown and a contraction in investment. However, he emphasized that the issue extends beyond job quantity to the quality and formality of employment.

Sta. Ana highlighted that studies from the Philippine Institute for Development Studies and the University of the Philippines estimate that informal workers could constitute as much as 82% of the labor force. This suggests that a large majority of Filipino workers face low wages and low productivity. He noted that most formal sector workers are employed by micro, small, and medium enterprises (MSMEs), which make up nearly 90% of corporations registered with the Securities and Exchange Commission. Many of these MSMEs are still in early stages of development, limiting their capacity to provide stable, well-paying jobs.

Ser Percival K. Peña-Reyes, senior research fellow at the Ateneo Center for Economic Research and Development, observed that while the economy is absorbing workers, it is not doing so quickly enough to provide productive employment for all new entrants. He pointed out that the 12.1% underemployment rate reveals that many Filipinos who are technically employed still desire more working hours, additional jobs, or better employment conditions. This indicates that job creation alone is insufficient if the jobs do not offer adequate income, stability, or productivity.

Peña-Reyes stressed that employment generation is a critical measure of whether economic growth is inclusive and productivity-enhancing. He argued that the economy must not only increase aggregate output but also create quality jobs that improve workers’ livelihoods. Sta. Ana agreed, stating that addressing these challenges requires structural transformation involving reforms in macroeconomic policy, industrial and technology policy, agricultural productivity, labor, education, health, and institutional strengthening.

Such reforms, Sta. Ana said, would take years or even decades to implement and must be guided by a clear strategic plan. He criticized the government’s current long-term development vision, Ambisyon Natin 2040, as primarily aspirational and no longer realistically achievable without concrete policy actions. Peña-Reyes recommended that the government focus not only on job quantity but also on building an economy capable of producing stable, productive, and better-paying work.

Key priorities include rebuilding the country’s tradable and industrial base, enhancing infrastructure to support productivity, improving the transition of young workers from education to employment, removing regulatory and competition barriers that keep firms small, and ensuring productivity gains translate into higher wages. He also emphasized preparing the labor market for the impact of artificial intelligence and integrating regional development into the country’s jobs policy.

Sta. Ana underscored the importance of restoring investor confidence as an immediate step, especially as the country aims to expand productive industries and employment opportunities. He cited recent issues such as corruption, policy reversals, uncertainty, and political polarization as factors that have eroded confidence.

The June Labor Force Survey revealed that 6.11 million Filipinos remain underemployed, seeking additional work hours or another job. Peña-Reyes said this data highlights the need to look beyond the headline unemployment rate when evaluating the labor market’s health. The central challenge is not merely whether Filipinos have jobs, but whether the economy is generating enough quality work that provides adequate income, stability, and opportunities for productivity growth.