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Job opportunities in the UAE dwindled significantly in the beginning of the year, as companies shed jobs and business conditions in the non-oil private sector deteriorated for the first time in 10 years, the latest data showed.
Employment at businesses across the country fell at “one of the strongest rates on record” in January 2020, mainly due to cost-cutting strategies, according to IHS Markit in its latest Purchasing Managers’ Index (PMI), a composite indicator of the operating conditions in the private sector.
The reports produced by IHS Markit use indices to quantify the responses from businesses on different aspects, including output, new business and jobs or employment.
Overall, the seasonally adjusted PMI for the UAE dropped from 50.2 in December to 49.3 in January, falling below the crucial 50.0 no-change mark for the first time since August 2009.
The sub-index for employment also fell below the 50.0 reading, at 48.8. “[It] was at one of its lowest levels seen in the survey,” David Owens, economist at IHS Markit, told Zawya. “So, we say the rate of [employment] decline was one of the quickest recorded,” he added.
Deteriorating conditions
According to IHS, companies in the UAE saw total new orders falling for the second time in three months and struggled to gain sales amid a slow business environment.
As a result, “employment at UAE companies fell at one of the quickest rates of the year,” IHS Markit noted.
“Key to the decline were firms’ efforts to reduce employment at one of the fastest rates on record in order to streamline costs,” noted David Owens, an economist at IHS Markit.
Owens said new orders dropped for the second time in three months in January, adding extra pressure on businesses and halting output growth.
Owens, however, noted that the upcoming Expo 2020 might be able to help restore new business volumes and kick-start activity in the private sector.
“Another bright note is growing momentum in export sales which businesses have attributed to stabilisation in some international markets,” he said.
While business confidence slightly weakened in January, the degree of optimism was much higher than the series average.
Companies have been implementing job cuts or ceased hiring to reduce expenditures. Organisations in the financial services, among other sectors, have been among the worst hit, as businesses consolidate.
“Industry players struggled and often downsized essentially due to demand contraction and a saturated market in the UAE,” wrote Pierre-Emmanuel Dupil, senior managing director for recruitment specialist PageGroup Middle East and Africa in a report last month.
“In the UAE, the financial services sector, despite staying active, also showed signs of a slowdown due to major consolidations,” he added.
However, Dupil noted that some sectors like retail, fast-moving consumer goods and luxury, picked up after years of slow activity, probably in preparation for Expo 2020.
(Reporting by Cleofe Maceda; Editing by Seban Scaria)
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