The official unemployment rate in Sri Lanka rose in the second quarter ended in June, as the country’s extraordinary economic crisis pushed many people out of work amid sky-high interest rates, import restrictions, skyrocketing inflation, and other demand destruction policies enacted to stem the tide.
According to data released last week, the official unemployment rate had risen to 4.6 percent by the end of the second quarter, up from 4.3 percent in the first.
However, this may not offer a whole picture of the local unemployment situation because the official unemployment rate does not include those who are unemployed but have given up seeking for work during the survey period.
Many people who made a living from imports, construction, consumer discretionary and durable goods, and the like have been pushed to the sidelines since the economy’s collapse.
Businesses were compelled to retrench people in order to stay afloat in the face of a squeeze in demand caused by galloping inflation, or to fully close shop, making all of their employees redundant.
There was evidence of significant layoffs, recruitment cuts, and hiring freezes across all industries. The Sri Lankan economy is now officially in recession, with the country’s GDP contracting in both the first and second quarters.
After a moderate 1.6 percent decline in the first quarter, the island nation’s economy shrank 8.4 percent in the second quarter, making it 4.8 percent smaller than it was a year ago.
Meanwhile, what makes the situation even more concerning is Sri Lanka’s declining labour force participation, which appears to have become an established issue.
For example, the labour force participation rate, which accounts for people who are both employed and jobless but seeking for work as a percentage of the working-age population, declined to 50.1 percent in the second quarter from 51.2 percent in the first.
While Sri Lanka’s working-age population may be declining due to a record number of individuals leaving the country, it appears that employed persons have also declined sharply, putting a strain on the ratio.
Meanwhile, other unemployed people in Sri Lanka may have given up looking for work because job possibilities have dried up.
Due to the prolonged economic crisis, Sri Lanka risks losing important talent and people at their prime working age, perhaps prolonging the suffering the people are experiencing in their everyday lives, as a weakened workforce could only do very little to support the economy’s lasting recovery.