Employment in Kenya’s private firms last month grew at the fastest pace in four months on the increased demand for goods and services that failed to lift wages for the first time in nine months.
Companies in sectors such as manufacturing, agriculture and services have reported rising their staff numbers since September, helping the firms reduce their backlogs for the first time since April.
This came on the back of higher demand for goods and services that have been witnessed in the three months to the end of the year, improving their cash flows and allowing firms to hire more workers.
However, the firm's staff costs dropped in November, suggesting that firms hired more workers at lower salaries.
Hiring has however declined in the wholesale and retail sectors and remained unchanged in construction.
“The seasonally adjusted employment index posted above the 50.0 mark for the third month running in November, signalling a continued rise in staffing at Kenyan firms. Though marginal, the rate of employment growth was the quickest since July,” analysts at Stanbic Bank and American analytics firm, S&P Global, wrote in the PMI report for November.
“Higher payroll numbers were mainly attributed to a rise in new orders.”
Hiring has been rising marginally since September after layoffs were recorded in August due to dropped sales amid the elections.
The runaway inflation this year saw companies cut jobs in the months of June and August on the back of squeezed stagnant salaries, hurting demand for goods and services.
The deepening cost-of-living crisis has largely been exacerbated by Russia’s war in Ukraine which disrupted global supply chains and affected the availability of items such as wheat, edible oil and fertilizer, thus raising their prices.
That has been compounded by below-average rainfall since last year which has hit agricultural output, including staple maize, and a weakening shilling against the globally bullish US dollar in a net import economy.
Companies reported the jump in the cost of inputs such as fuel and a range of other items in short supply such as wheat due to the war.
Inflation has however slowed down to 9.2 per cent in November from 9.6 per cent in October, on the back of food and fuel prices drop and the central bank rate hikes to cost the cost of living measure.
The firms reported ease in inflation pressures on input costs and output charges to three-month lows since August tied to a softer rise in purchase prices and a fall in staff wages.
The high unemployment rate has also put pressure on wages and salaries since the high layoffs recorded during the Covid-19 period.
The overall PMI reading — a gauge for month-on-month private sector actors such as output, new orders and employment — rose to 50.9 in November from 50.2, signalling a slight improvement in the private sector's health. It stood at 51.7 in September.
Readings above 50.0 signal growth in business activity, while those below that point to a contraction.
The performance was also helped by improved output in the agriculture and construction sector amid new orders that picked up for the third month running and favourable weather conditions.
The survey showed that input costs rose, due to higher import costs over a weaker shilling against the dollar, higher taxation and transport costs.
‘The latest PMI data showed that business activity in Kenya continues to grow, albeit slowly, for the third consecutive month corroborating other data such as private sector credit growth. Firms registered a marginal increase in output amid an increase in new business from domestic and foreign customers and favourable weather conditions,” said Mulalo Madula, Economist at Standard Bank.
“Still, rising input and output prices alongside monetary policy tightening has not caused a negative demand shock in nominal terms. The second rainy season, the 'short rains', appears to be going better than previously forecast.”
However, businesses’ optimism for future activity has dropped sharply from October's 15-month high.
Those optimistic plan to open new branches, introduce products and services and increase marketing to boost sales.