Which economic sectors are driving the labor Demand?
Exploring the employment contribution by sector and firm size
A main objective of Saudi Arabia’s economic transformation plan is to reduce its economy’s dependence on oil and promote the development of sustainable sectors like advanced manufacturing and tourism. One way to monitor the country’s progress in economic diversification is by comparing the employment contribution between natural resource-sectors (e.g., oil and mining) versus those in non-resource dependent sectors (e.g., manufacturing and IT). I then compare economic diversity across Saudi Arabia’s three largest cities to assess whether certain cities are more resilient and prepared for a post-oil economy than others.
To measure the contribution of jobs for each economic sector, I compute both 1) the monthly share of advertised jobs by sector, and 2) the monthly growth rate in online job ads by sector. To learn which sectors contribute the most to labor demand, I restrict my graph to sectors that have consistently posted at least 15 unique employment ads or more in every month, which reduces our data from 13 economic sectors to 4. Specifically, the graph suggests that nearly 60% of job ads in March and April 2023, respectively, were concentrated within four economic sectors with firms in the “IT” sector posting the highest number of jobs. The positive news here is that the four economic sectors are suitable for workers with various levels of education (e.g., hotels are mainly recruiting unskilled labor, manufacturing typically hiring mid-skilled employees, while the IT sector is primarily targeting high-skilled workers). In terms of month over month job ads growth rates, the “Hotel & Accommodation” sector grew at the fastest pace where the number of jobs increased by 154% between February and April 2023, respectively. This is likely due to the record level spending and unprecedented demand on Saudi tourism, which doubled between 2021 and 2022.
Graph 1. Monthly share of advertised jobs by economic sector
How does economic diversification vary by city?
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