Job cuts are rolling in as inflation fears rise

By Monica Muema

Companies cut jobs for the second month running in June on the back of runaway inflation which squeezed stagnant salaries, hurting demand for goods and services.

Findings of Stanbic Bank Kenya’s Purchasing Managers Index (PMI), based on feedback from about 400 corporate managers, suggested sales dropped at a quicker rate last month than a month earlier, setting the stage for further layoffs.

For the third consecutive month, businesses reported a drop in activity during the month, with the latest S&P Global Kenya Purchasing Managers’ Index (PMI) registering a fall of 46.8 from 48.2 in May.

Last month’s appraisal was the lowest seen since April 2021 signaling a solid decline in the health of the Kenyan private sector, which has been triggered by the rising inflation and weakening shilling value.

Kenyan labor force, particularly young people are disproportionately employed in restaurants, entertainment joints, tourism sector which were largely shut down on March and remained closed through the three-month dry spell and beyond when the country went into a lockdown – with retail, another popular source of jobs for young people, also hit hard.

As a result, the KMI report now says the country should prepare for tougher period ahead as more companies look to close shop owing to the ongoing inflation concerns.

The unemployment rate has been rising sharply since the pandemic hit, approximately doubling to 10.4 percent in the second quarter of 2020 for instance as measured by the Kenya National Bureau of Statistics (KNBS) Quarterly Labor Force Survey.

Kenya’s economy has been hit hard by COVID-19, severely affecting incomes and jobs. The economy has been exposed through the dampening effects on domestic activity of the containment measures and behavioral responses.

A total of 604 firms in Kenya sent workers home due to the coronavirus fallout, according to Federation of Kenya Employers (FKE) which said that at least 33 jobs were lost in every modern sector company between March and August 2020 – that number is expected to swell if estimates by WB are anything to go by.

The Kenya National Bureau of Statistics estimated that around 1.7 million people had been made redundant due to the outbreak during this time, a figure that FKE had termed as ‘conservative.’