- But massive job losses are expected in the coming quarters as opportunities narrow in a shrinking economy
Sri Lanka’s unemployment rate eased in the March quarter as the economy emerged from most virus-related restrictions, only to be brutally hit by a currency crisis that brought it to a near standstill, undoing even the small improvements made in the matrices of employment.
Sri Lanka’s official unemployment rate eased slightly to 4.3 percent by the end of March from 4.6 percent in December 2021, according to the Department of Census and Statistics.
But the major economic collapse in March is likely to have forced many thousands out of their jobs in the next quarter, which ended last week, while the damage is still unfolding at an intense pace as factories scale back operations, putting thousands of workers out of a job, show Purchasing Managers’ Index data.
Meanwhile, day laborers have lost their jobs as the crippling fuel shortage has brought the entire transport system to a near standstill, causing a virtual shutdown of the entire economy since two weeks ago, with no end in sight to the misery people are being subjected to every day.
The official unemployment rate masks true unemployment in the economy because it does not reflect those who are out of work but not looking for work during the survey period.
During the two years of the pandemic, while there were massive job losses caused by layoffs, another larger segment voluntarily left the labor market, which was described as the “great resignation” as some feared contracting the virus and others they just saw fewer reasons for staying at their jobs.
As a result, Mirror Business two weeks ago showed that Sri Lanka has more people doing nothing by the end of 2021 than those working in some way, as reflected in the labor force participation rate ( LFPR).
However, in the first three months, the LFPR rose to 51.2 percent from 49.5 percent, data released last week showed.
The LFPR measures the economically active population, or the segment of the population that is either employed or at least looking for work, as a share of the country’s working-age population.
Although there was a slight improvement in the pace in the March quarter, it may fall to new lows in the coming quarters as the Sri Lankan economy is in its worst economic downturn, which will wipe out economic opportunities at a rapid pace.
The World Bank recently forecast a 7% contraction in Sri Lanka’s economy in 2022, with the decline continuing into 2023 before an improvement can be seen from 2024, which will also be modest.