Why hiring by firms has hit new high

Business conditions began to recover across the Kenyan private sector for the first time since April in September. 

The improved conditions saw a rebound in hiring, with companies expanding their workforce, with the level of employment hit a new high since May 2023.

According to the monthly Stanbic Bank Kenya Purchasing Manager’s Index (PMI), there was an improvement in business performance for the first time in five months.

This, according to the survey released Friday, was driven by solid expansions in output, new orders and employment.

The PMI also pointed to a fresh upturn in the health of the private sector, after a period impacted by political protests and rising price pressures.

It also showed that an easing of supply-side pressures resulted in the greatest shortening of delivery times in four years. The rate of input price inflation slowed in September, but firms signalled a quicker increase in selling charges.

The headline PMI rose to 51.9 in September, up from 49.4 in August. It is also above the 50.0 neutral mark for the first time since April.

PMI measures the prevailing direction of economic trends in different sectors. Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

“Business conditions expanded in September, implying the start of a recovery after the disruptions that followed protests in the second quarter. New orders and output strengthened as consumer demand improved, despite some firms reporting caution from clients due to still challenging economic conditions,” said Christopher Legilisho, an economist at Standard Bank.

The recovery resulted in increased hiring rates among firms, which, according to the survey, led to a rise in employment that was the quickest recorded since May 2023.

Increase in sales volumes spurred a jump in overall employment across Kenyan firms, especially in agriculture and manufacturing drove the surge.

Fast-paced growth in these sectors, however, masked a downturn in job numbers within the construction sector.

“Employment, meanwhile, increased due to gains from new orders and output. However, low sales in recent months led to sustained weakness in firms’ buying decisions; quantities purchased fell in September, although inventory stocks rose,” said Legilisho.

“Firms reported a moderation in the rate of input price inflation in September, despite some businesses remaining concerned about higher taxes and commodity prices.

“Encouragingly, business prospects for the upcoming year were still strong, albeit far off from historical trends — this implies that, while conditions for some firms have been improving, most still experience the business environment as challenging.”