Business

Kenyan firms hire workers for first time in five months -report

Kenyans on a queue. Companies hired new staff for the first time in five months in January. (The Standard)

By Ibrahim Omar | Monday, February 5, 2024

There renewed increase in the hiring of new workers by private firms was due to the improved economic conditions.

Kenyan companies hired new staff for the first time in five months in January, a move that was driven by a slowdown in inflation, according to a new report.

The Stanbic Bank Kenya Purchasing Managers Index (PMI) report for January released on Monday shows that Kenya’s private sector moved closer to growth territory during the month.

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The headline PMI rose to a five-month high of 49.8 in January, up from 48.8 in December and was almost level with the 50 mark which signals a stabilisation.

Readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show a deterioration.

According to the report, there was a renewed increase in the hiring of new workers by private firms as economic conditions improved slightly, which is the first since August 2023.

The rate of job creation was only marginal, however, with comments mainly linking the rise to the addition of temporary employees. Backlogs of work also increased, but only fractionally.

“There were further declines in manufacturing and the wholesale and retail sectors, with firms remaining under pressure from insufficient cash flow. Still, jobs increased in January as demand conditions stabilized,” said Christopher Legilisho, an economist at Standard Bank.

Despite this slight improvement, Kenyan companies are still facing tough times due to increased taxation and high cost of inputs such as machinery and equipment, fuel and electricity.

“Business activity and new order volumes dropped only fractionally, while firms expanded their workforce numbers for the first time in five months,” said the report.

As a result, business activity at Kenyan firms fell for the fifth month running in January, albeit at the slowest pace in this sequence and only slightly.

“The almost-stable trend was linked to a similar picture for new order volumes, which decreased at only a fractional pace,” noted the report.

The increase in hiring by private firms comes as a major boost to the economy which is still facing an unemployment crisis.

The most recent labor statistics released by the Kenya National Bureau of Statistics (KNBS) in April 2023 show that the country’s unemployment rate is growing at twice the growth rate of the labor force.

By the end of December 2022, Kenya had a labor force of 19.39 million, underlining a growth of 1.5 per cent from the previous year.

During the period, unemployment stood at 2.97 million, which is a 3 per cent increase from a year earlier.

More than half of Kenyans without jobs, or 1.54 million people, were between 20 and 29 years old, underlining the growing crisis of youth unemployment.

Amid the unemployment crisis, President William Ruto has promised to create hundreds of thousands of new jobs annually through the affordable housing programme.

Kenyans are currently contributing 1.5 per cent of their monthly gross pay through the housing levy to fund the project.

Further, the government is encouraging more Kenyans to venture abroad in search of employment opportunities in other countries and has rolled out new programmes to facilitate the labour migration.