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22-Oct-2018

Saudi Arabia Economics: 2Q18 labour market survey - Weak market dynamics persist as expat job losses cross 1mn mark

Expat job losses accelerate in 2Q18 …

The number of employed non-Saudis declined by the largest amount since at least 1Q17, providing further evidence of the weak macroeconomic backdrop and Saudisation policy. The pace of expat job losses accelerated to 290k in 2Q18, 24% higher Q-o-Q and 3.7x Y-o-Y, bringing total job losses close to the 1mn mark. Actually, excluding domestic labour (drivers, housekeepers, etc), expat job losses have already crossed the 1mn mark in the past 18 months at 1.1mn. We note this number excludes informal labour as well as that of dependents, indicating that the overall decline in the expat population has likely crossed the 1.5mn mark over the past 18 months. Job losses were again mostly concentrated in three sectors, which accounted for 89% of total jobs lost: construction (60%), trade (21%) and manufacturing (8%). At the domestic labour level, expat drivers continued to lose jobs for the third consecutive quarter (6.1k in 2Q18 and 36k in past nine months), a number that is likely to increase over the coming quarters as women are now driving (from mid-2018); we note there are still 1.36mn expat drivers still working in the kingdom.
 
…and nationals continue to lose jobs too

Expat job losses were not on their own, as we saw a similar trend for nationals with the number of employed persons declining for the second consecutive quarter – further evidence of the weak labour market conditions. The number of employed nationals dropped by 25k, again the most since at least 1Q17, this time showing an accelerated pace of decline in employed women (a drop of 10k). We note that the job losses were entirely in the private sector with the government sector seeing just less than 1k jobs created for nationals. For Saudi males, job losses were primarily concentrated in the construction sector and, to a lesser degree, the manufacturing sector. As for females, the job losses were led by services and followed by the construction sector. The numbers mean that the number of employed Saudis declined by 39k in 1H18, reversing gains of 102k in 2017. As a result, unemployment remains unchanged at an all-time high of 12.9% in 2Q18 with male unemployment remaining largely stable at 7.6%, while that of women up slightly to 31.1% from 30.9% in 1Q18. 
 
Weak labour market conditions sustain in 2018

We expect 2H18 labour market statistics to show weakness with the elevated pace of expat job losses likely to continue, given: i) Saudisation of 12 services coming into effect in 3Q18; ii) weak macroeconomic conditions with non-oil growth remaining around 2%; and iii) rising expat fees. There could be an uptick in employment of Saudis in 2H18 on the back of this latest wave of Saudisation, but clearly general macro conditions remain weak, hinting these job gains could be limited. 

Mohamed Abu Basha