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08-Jul-2018

Saudi Arabia Economics - 1Q18 labour survey: Weak market dynamics as expat job losses remain elevated, while nationals’ unemployment ticks up

Expats lose another 234k jobs in 1Q18…

Saudi Arabia’s expat labour force sustained its decline for the fifth straight quarter for which data is available, shedding some 230k jobs in 1Q18. The rate of job losses saw a six-fold increase Y-o-Y but dropped slightly (15%) from an all-time high of 277k in 4Q17. Job losses, again, were concentrated in the construction, trade and manufacturing sectors, which together accounted for 89% of the total. On an organisational level, job losses were recorded at all three levels: public, private and domestic (home helpers, drivers, etc.). Interestingly, the data shows elevated job losses of expat drivers (22k in 1Q18 vs. only 8k in 4Q17), possibly coming ahead of granting women the permission to drive (effective since late June). 
 
…and set to lose more in 2018

Expats have cumulatively lost 700k jobs in the past five quarters, and the number rises to nearly 800k when excluding jobs created in the domestic labour space. Note that the Passport Control Authority stated earlier in the year that 811k expats had left the Kingdom in the preceding 18 months; with labour survey numbers not including family members, as well as unregistered workers, then, clearly, the numbers of people leaving are higher. We are expecting the rate of job losses for expats to remain elevated over the course of the year, given: i) further nationalisation of jobs, with 12 new jobs being Saudised by September; ii) rising expat fees, with 2Q numbers likely showing another elevated reading, as some expats were awaiting the end of the school year to leave; and iii) weak macro backdrop, especially in the construction and trade sectors. 
 
Weak labour market conditions for nationals as unemployment rises

Unemployment amongst nationals increased slightly to 12.9% in 1Q18 after stabilising for three quarters and following sharp gains in employment in 4Q17, unsurprisingly pointing to the fact that the economy is still unable to generate enough employment opportunities for nationals, given the weak macro backdrop. Men’s unemployment rate saw an uptick, driving the overall rate higher, while that of women was largely stable (see Fig. 5 & 6) as nationals lost 13k jobs during the quarter. Job losses were mostly focused in the ailing construction sector and to a lesser degree manufacturing, despite the sector’s rapid growth during the quarter, according to latest GDP data. We forecast some employment gains towards the end of the year, especially given the nationalisation of the 12 services we pointed out earlier – though the weak macro backdrop is not really showing signs of improvement to drive us to forecast much wider job gains for nationals.

Mohamed Abu Basha