THE economy may have recovered from the pandemic but jobs have yet to catch up, with unemployment returning to post-pandemic levels in July as the labor market failed to transform fast enough, economists said.
On Tuesday, the Philippine Statistics Authority (PSA) reported 3.14 million jobless Filipinos in July, pushing the unemployment rate to 6 percent. This is the highest unemployment rate since June 2022, when the economy was still recovering from Covid-19.
The latest reading also brought the January-to-July unemployment rate to 5.2 percent, significantly higher than the 4.1 percent recorded in the same period last year.
The increase came even as employment grew, as more Filipinos entered the labor market than the economy could absorb. Employment rose by 3.16 million year-on-year to 49.21 million, but the labor force expanded by 3.71 million to 52.36 million.
De La Salle University economist Marites M. Tiongco said this gap reflects a deeper weakness in the post-pandemic recovery: the economy has restored jobs, but has not transformed its job base enough to absorb the growing labor force.
‘We restored jobs faster than we transformed jobs. The Philippines has not generated enough sustained expansion in manufacturing, modern agriculture, construction, logistics, digital industries and other sectors capable of producing large numbers of higher-productivity, better-paying jobs,’ Tiongco told the BusinessMirror.
PSA data showed that 62.8 percent of employed Filipinos were in services in July, compared with 19.7 percent in agriculture and just 17.5 percent in industry.
Tiongco said the lack of transformation in the job market mirrors the broader path of the economy since the 2022 reopening, which remained heavily reliant on consumption and services instead of stronger investment and productivity-enhancing industries.
That weakness has become more visible this year as economic growth slowed to 2.8 percent in the first quarter and 2.3 percent in the second quarter.
Household consumption and investment remained the biggest drags on growth, with consumption growth slowing to 2.8 percent in the second quarter from 3 percent in the first, while gross capital formation contracted by 9.2 percent, worsening from a 3.1-percent decline in the previous quarter.
University of Asia and the Pacific economist Marco C. Agonia echoed Tiongco’s assessment, saying the post-pandemic recovery has failed to develop more durable and diversified sources of growth.
‘The economy has not grown large nor deep enough to accommodate the growing pool of young workers joining the job market. Add recent macro headwinds dampening economic performance, and the macro picture goes from steady to sputtering,’ Agonia told this newspaper.
Ateneo de Manila University economist Leonardo A. Lanzona Jr. also pointed to a weakness in the country’s investment-led job creation, saying investment incentives have not generated enough employment relative to the size of capital being invested.
He said incentives programs under the Board of Investments, Philippine Economic Zone Authority, and Strategic Investment Priority Plan have tended to favor the scale of investments over their job-generating capacity-resulting in fewer jobs being created for every peso invested.
‘That gap compounds yearly: degree-holders’ share of the jobless rose from 26.9 percent (2020) to 35.6 percent now, Lanzona told the BusinessMirror.
Job concentration
Beyond the weak transformation of the job market, economists flagged the concentration of economic activity in Metro Manila as another constraint on job creation.
PSA data showed that among regions, Metro Manila posted the highest unemployment rate at 8.8 percent or 560,000 jobless individuals. This is a significant jump from the 5.2 percent in April 2026 and 4.7 percent in July 2025.
Agonia said the spike shows the limits of relying on one region to absorb the country’s growing pool of workers, as Metro Manila’s physical constraints and slower economic growth could eventually make it harder to generate enough jobs for new entrants.
‘This highlights the need for developing new growth corridors and regional economies to spread out hiring activity,’ he said.
Tiongco agreed, saying the country needs to diversify growth beyond Metro Manila, with emerging regional cities developed as stronger centers for manufacturing, logistics, agribusiness, digital services and professional employment.
She said it would be difficult to continue relying on Metro Manila to absorb a large share of the country’s growing labor force.
‘This requires infrastructure, reliable electricity, industrial estates, housing, public transport, skills formation and investment incentives to operate as a coordinated regional-development strategy,’ she added.
Temporary relief?
With these structural weaknesses weighing on the labor market, economists had mixed views on whether employment can meaningfully recover in the coming months, even as the holiday season typically brings more hiring.
Lanzona said any improvement from holiday hiring would likely be temporary because the pressure on the labor market is structural rather than seasonal.
He said new groups of young Filipinos will continue entering the workforce each year regardless of the holiday cycle, keeping pressure on job creation.
‘Any holiday bump would be temporary…and only sustained labor-intensive investment would narrow the gap,’ he added.
Tiongco also noted that the usual seasonal boost could also be weaker this year as slower economic growth may discourage firms from making permanent hires, high borrowing costs could weigh on construction and investment, and renewed Middle East tensions could raise fuel costs and weaken household spending and business activity.
‘A more convincing recovery would require simultaneous improvements in manufacturing employment, construction, private investment, average hours worked, real wages and permanent wage-and-salary employment,’ she added.
Agonia, for his part, said seasonal hiring could still provide some support to employment figures, but a more meaningful recovery would depend on greater stability from both domestic and external shocks.
Easier business, more quality jobs
Meanwhile, the Department of Economy, Planning, and Development (DepDev) said the country needs to improve its ease of doing business to attract more investment and generate quality jobs.
‘More Filipinos are participating in the labor market, which means that we need to intensify efforts to attract investments, especially those that create quality jobs. The key is to continuously improve the ease of doing business in the country,’ DepDev Secretary Arsenio M. Balisacan said.
He said the government needs to help workers and businesses adapt to changing economic, technological and climate-related conditions by supporting micro, small, and medium enterprises, attracting investment in high-growth industries, and expanding skills training and pathways to formal employment.
This includes scaling up platforms such as AI-enabled eTrabaho and the Tesda Skills Passport, strengthening links from social assistance to jobs and training, helping MSMEs adopt new technologies, and advancing reforms under the National Education and Workforce Development Plan 2026-2035.