740,000 new jobs put the economy on recovery path

Kenya’s economy last year gave the clearest signal yet that it was on course to full recovery after it generated the largest number of jobs since 2010.

Official data released Tuesday shows that the economy weathered the severe political shocks associated with last year’s election to generate nearly 750,000 jobs even as economic growth stayed below the projected five per cent.

Analysts cautioned that data from the department of planning was hardly a cause for celebration even as they acknowledged that it eased fears of a possible dip in the election year that has traditionally dogged Kenya — slowing down jobs growth in a country that is sitting on an unemployment time bomb.

Though the more than 742,800 new jobs created in 2013 was still short of the one million jobs required to stem the tide of mass youth unemployment, economists said sustaining the momentum offers Kenya the best chance ever to defuse the threat of social strife associated with jobless and adds impetus to the fight against poverty. 

The majority of the new private sector jobs were in the construction and service industries while the public sector mostly added to the jobs count with expansion in health, education and security sectors.

“Growth [of jobs] in the formal-private and informal sectors is attributable to economic growth, especially in labour-intensive sectors such as wholesale and retail trade, and construction,” Planning and Devolution minister Anne Waiguru said as she released Economic Survey 2014.

At 742,800 the number of new jobs created in 2013 was nearly 100,000 more than the 665,800 generated in 2012 when the rate of economic expansion stood at 4.6 per cent.

Job creation was much slower in the formal sector though the jump to 116,800 was nearly double the 64,900 created the previous year.

The formal sector’s ability to create jobs partly benefited from the rapid expansion of public sector employment with the establishment of county governments following last year’s election.

Nominal average wage earnings in the formal sector also grew by 13 per cent helped by last year’s 14 per cent rise in the minimum wage and the 18.2 per cent salary increment for unionisable employees who had registered their dispute with the Industrial Court.

The 13 per cent wage increment outweighed the overall inflation rate, allowing real earnings to rise by 7.7 per cent in 2013 compared to a decline of 3.1 per cent the previous year.

Inflation stood at 5.7 per cent in 2013 down from 9.6 per cent in 2012 and 14 per cent in 2011, giving wage earners some purchasing power.

The average annual pay in the modern sector also rose to stand at Sh497,488 in 2013 compared to Sh440,364 the previous year, amounting to an average of Sh41,457 a month compared to Sh36,697 the previous year.

The Jubilee government aims to create at least a million jobs annually, a target that economists say can only be achieved if economic growth rises above the seven per cent medium-term target. 

Ms Waiguru said growth in 2013 was constrained by a slowdown in the agricultural sector which grew by a margin of 2.9 per cent compared to 4.2 per cent in 2012.

Besides, the hotel and restaurants industry suffered a fall in tourist arrivals and shrank by more than four per cent for the first time since 2008.

“Growth was constrained by the fact that agriculture expanded by only 2.9 per cent yet it is the single largest sector of the economy,” the minister said.

The 4.7 per cent growth was realised against the backdrop of a stable macroeconomic environment characterised by a low and stable inflation rate, infrastructural development and continued expansion of the construction sector.

Economist Terry Ryan said the construction sector has risen to become a key driver of growth in the Kenyan economy given that it created 13,300 new jobs or 13.5 per cent more jobs than the previous year’s.

The construction sector also expanded its contribution to the GDP to 4.1 per cent from 3.7 per cent the year before.

Notable jobs growth was registered in the services sector, raising the financial intermediation and insurance sectors’ share of the GDP to 9.9 per cent, human health and social work services at 8.9 per cent while information and communication now accounts for 8.3 per cent of the value of all goods and services that Kenya produces annually.

Ms Waiguru said the government is laying the foundation that would ensure higher growth and higher rate of job creation, including non-reliance on rain-fed agriculture.

Agriculture now accounts for 25.3 per cent of the GDP, and Ms Waiguru said the country’s overall economic performance remains tied to the sector.

World Bank economist Shantayanan Devarajan reckons that the agricultural sector has four times ability to alleviate poverty compared to other sectors.

“Stimulating agriculture is the best way to help the poor and create the much-needed jobs. A one per cent increase in agricultural production is four times more powerful in reducing poverty than non-agricultural production,” Mr Devarajan said.

Ms Waiguru said the agricultural sector has potential to grow faster but added that it would require a departure from reliance on rains.

The Economic Survey 2014 shows that the government remains a better employer in Kenya going by the finding that average real public sector wages remain higher than private wages, having set that record in 2010.

In 2009, annual average wages in the private sector stood at Sh376,707 compared to the public sector’s Sh372,812 but this changed in 2010 when private sector wages fell to an average of Sh370,958 while public sector wages rose to Sh380,957.

The private sector wages are yet to recover to the 2009 levels and have in fact fallen to Sh335,043 in 2013 compared to the public sector’s Sh405,295.