Thursday, August 21, 2008

Moroccan Unemployment Falls in Q2 2008

Morocco's unemployment rate, long a cause for concern, has been dropping steadily this year, on the back of job growth in services and construction. Further institutional reforms to bolster competitiveness and and financial openness are expected to help the trend to continue.

The State High Planning Commission announced on August 7 that Morocco's official unemployment rate dropped to 9.1% in the second quarter, down from 9.6% in the first. This leaves Morocco with some 1.03m unemployed, compared to 1.06m at the end of March. Unemployment stood at 9.8% at the end of 2007, up 0.1% from the end of 2006.

Urban areas saw particularly strong job growth, and the services and construction sectors were the two leading drivers of job creation. Services generated some 152,000 new jobs, with the business process outsourcing (BPO) and telecoms sector proving particularly dynamic. Meanwhile, government infrastructure projects, as well as heavy private investment in real estate and tourism helped boost the construction sector, which created 80,000 new jobs in the second quarter.

Evidently, this trend of falling unemployment rates is a positive one. Joblessness has long been a cause for serious concern in North Africa. Morocco has a lower rate than its Maghreb neighbours - Tunisia has a rate of around 13.9%, and in Algeria it is around 12.3% - but the issue is still a pressing one, both for economic and for social reasons. A 2006 government report suggested that the country needed a net increase of 400,000 jobs annually for the next two decades in order to provide enough employment for its people, given the underlying demographic dynamic.

Moreover, with Spanish construction firms facing much harder times, Morocco may soon face the additional challenge of workers returning from across the Gibraltar Straits, potentially putting further pressure on the authorities to create jobs.

With 30.5% of Morocco's population of 34.3m aged 14 or younger, according to the Central Intelligence Agency (CIA), job creation for the young is one of the government's major priorities. 2007 data indicate that 17.6% of those in the 15-24 age group are unemployed. This rises to around one third in urban areas - rural communities often employ the young in agriculture, including on the family farm, as soon as they leave school, contributing to relatively high youth employment rates (lower levels of official unemployment registration are also a factor).

The government's efforts to cut back a bloated bureaucracy have helped trim the public sector's payroll and ease the burden on the private sector. In 2006, for example, the government introduced a voluntary retirement scheme for the public sector, under which those opting to quit are not replaced.

Thus employment growth in BPO and other technical fields, which are areas that often employ young graduates, is a very welcome trend. If growth in this sector continues, it will be seen as a vindication of the government's policy of whittling down public sector bureaucracy. Indeed, in an increasingly competitive global economy - particularly for services like BPO - it is important that the Moroccan authorities press ahead with supply-side reforms in order to ensure that Morocco remains an attractive location for investment, particularly in the service sector.

Countries - including Morocco - that have liberalised labour markets making it easier to hire and fire workers, have often reaped a dividend of lower unemployment. Lower taxation and easing the bureaucratic burden would further promote business-start ups and job creation. Meanwhile, Morocco's strong trade ties with the EU have supported the growth of export-oriented industries, but commerce across the Maghreb region remains underdeveloped - which constitutes a missed opportunity, given the potential for job creation these fast-growing economies really need to do more to encourage intra-regional trade to thrive.

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