Macroeconomic Determinants of Unemployment in the Philippines: Evidence from 1996–2025

Abstract

Unemployment remains a major concern in the Philippines despite periods of sustained economic growth. This study examines the macroeconomic determinants of unemployment in the Philippines from 1996 to 2025 by analyzing the effects of GDP growth rate, inflation rate, trade openness, foreign direct investment (FDI) net inflows, population growth rate, and structural break variables representing the Global Financial Crisis and the COVID-19 pandemic. Using annual time-series data, the study employs multiple linear regression through the Ordinary Least Squares (OLS) method to determine the relationships among macroeconomic variables and unemployment. Results indicate that population growth rate, trade openness, and the COVID-19 pandemic have significant positive effects on unemployment, while GDP growth rate, inflation rate, FDI net inflows, and the Global Financial Crisis show no significant effects. The findings suggest that unemployment in the Philippines is influenced more by structural conditions than by traditional macroeconomic relationships. Rapid population growth contributes to labor supply pressures, while trade openness creates varying employment outcomes across domestic industries. Additionally, the COVID-19 pandemic significantly disrupted labor market conditions. The study highlights the importance of strengthening the economy’s capacity to absorb a growing workforce through employment-oriented policies and structural improvements.