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Saudi Arabia Economics - 2Q19 labour survey: Expat job loss moderation continues; nationals shed jobs

Pace of jobs losses in business economy drops sharply

Saudi Arabia’s economy continued to witness positive job growth for expats in 2Q19, for the second consecutive quarter, according to latest data published by the General Authority for Statistics, in further signs of a gradually normalising labour market. A total of 114k expat jobs were created, though mainly attributed to job creation in the domestic labour segment (245k), concentrated primarily (97%) in two segments: ‘drivers’ (127k) and “servants and house cleaners” (112k). Meanwhile, expat jobs are still being shed in the business economy, one more indicator reflecting overall economic activity. The positive news, however, is that the job losses were happening at a slower pace, with only 132k jobs lost in the quarter, down 29% Q-o-Q and 58% Y-o-Y from 185k jobs lost in 1Q19 and representing the slowest pace of job losses in 1.5 years. The new breakdown of employment by sector shows that expat job losses continue to be driven by the construction and trade sectors. We noted in our previous report, though, that the increase should not regarded as a source of excitement, and the case still holds for this quarter, in our view. 
Nationals’ employment drops in 2Q19

Overall weak macro conditions in the Kingdom continued to weigh on the nationals’ labour market, with no signs of job creation emerging. Saudi nationals lost 21.8k jobs in 2Q19, following two quarters of nearly stagnant job growth. In a further confirmation of the weak macro backdrop, the private sector shed approximately 28k jobs, marking, at least, the sixth consecutive quarter where the private sector has lost jobs, as employment creation for nationals remains concentrated in the public sector, with the latter sector having created 7k jobs in 2Q19, slightly higher than 5k in the preceding quarter. Nevertheless, unemployment for nationals continued to drop, falling to 12.3%, thanks largely to lower unemployment rate for males – which dropped to 6.0% in 2Q19 from 6.6% in 1Q19. 
Still holding on to our view of expat job losses moderating  

The continued moderation of expat job losses in the business economy confirms our earlier view that they should moderate to an average of 150k in 2019 vs. c250k last year. We envisaged such a slowing pace of job losses would be driven by the Saudisation programme already reaching its peak, and that the economy has started to normalise. We note that cumulative job losses for expats in the business economy stand at 1.8mn in the past 2.5 years. The gradual normalisation in the labour market is still not reflecting much for nationals; there are still hardly any signs of job creation for locals, especially in the private sector, which is a clear reflection of the weak macro dynamics that persists. This, in a way, endorses our view that the slow, gradual uptick in non-oil GDP growth largely reflects a jobless normalisation of macro conditions, post last year’s fiscal measures, rather than showing signs of a secular recovery.

Mohamed Abu Basha

Mostafa El Bakly