At a spartan hall converted from a closed textile company east of Manila, hundreds of Filipinos milled around small corporate booths looking for work. The longest lines at the job fair were for call center or business process outsourcing firms.

Despite the odd hours - employees sit down to work just as much of the country gets ready for bed - the call center sector is the current favorite among job seekers, from the annual wave of 400,000 college graduates to more mature workers.

I earn double here than in my previous job, said Jasmin, 35, who quit her position as a clerk at city hall to handle calls from customers of a major telecoms company in the United States.

Above-average salaries and fast promotions are some of the attractions at call centers and outsourcing firms, which have expanded to include legal, data and medical transcription, as well as animation and software development.

This year, the outsourcing sector is expected to employ about 266,000 people in the developing Southeast Asian country, surging from just about 2,000 five years ago.

The number is likely to hit nearly 1.1 million by 2010, according to the Business Processing Association Philippines.

But with call centers hiring just three to five people for every 100 applicants - a reflection of the declining quality of education in the Philippines - some analysts say the industry is far from the cure for the country's unemployment problem.

Of course, it will generate jobs but the majority of our unemployed don't have adequate skills, said Emmanuel Esguerra, associate professor at the University of the Philippines' School of Economics

EDUCATION IS KEY

Esguerra said only a quarter of the 3-4 million Filipinos without work - the number depends on the government's new or old definition of unemployment - had more than a high school education.

Quality of labor is a major issue facing the Philippines, where budget deficits and the government's debt of about $76 billion have limited state spending on basic education.

Patricia Sto. Tomas, who recently quit as labor secretary, said Manila had set aside 500 million pesos ($9.5 million) to retrain near hires in the outsourcing industry - those needing more computer training or English-language skills to get a job.

Despite President Gloria Macapagal Arroyo's vow in 2004 to create 1-1.5 million jobs every year until the end of her term in 2010, progress remains slow in an economy driven by remittances, domestic demand and exports of electronics and farm products.

Arroyo's job creation goal was premised on the economy growing 7-8 percent per year, a target that has been elusive.

This administration has the worst unemployment record, Esguerra said. It has to do with the accumulation of the problem, but I think it also suggests the response has been inadequate.

The unemployment rate has stayed above 10 percent since 2001, when Arroyo was propelled to the presidency after a popular uprising. The last time it was as high was in the final years of late dictator Ferdinand Marcos's rule in the mid-1980s.

In April, using the old definition, the unemployment rate was 11.8 percent.

With labor force growth of 3.5 percent per year, the number of people without work would still have widened by 2010 even if 1 million new jobs were created annually, Esguerra said.

Only 807,000 jobs were created in the year to April 2006 after nearly 700,000 from May 2004 to April 2005, government statistics show.

QUALITY OF JOBS

Many of the jobs created are not the quality jobs because the big increase came from the ranks of own-account workers and unpaid family workers, said Dante Canlas, an economics professor and former socioeconomic planning secretary.

Own-account workers include Filipinos who shift to the underground economy with street stalls or small village shops when they are out of work or seeking to supplement low salaries.

The rise in underemployment is another worrying trend.

Workers wanting more hours made up 25 percent of the labor force in April, almost flat from 26 percent a year earlier but higher than the 18.5 percent in the same month of 2004.

With annual average inflation above 6 percent since 2004 and likely as high as 7.9 percent this year, real wages have been falling, pushing Filipinos to work longer hours.

Low wages and lack of opportunities have sent about a 10th of the population of 85 million to work abroad as sailors, nurses, maids, entertainers, IT professionals and accountants.

Canlas said the underemployment problem cut two ways, with most businesses not investing in new technology that would lead to higher production and workers failing to build their skills for better productivity.

Unless the economy is able to significantly increase its investments and raise its productivity so that there will be a scale effect on employment demand, in the short run the unemployment rate will remain high, Canlas said.

In the case of agricultural workers, who make up about 35 percent of total employed and 41.5 percent of underemployed, most of the jobs created are either seasonal or part-time.

Sto. Tomas said the Philippines must harness the potential of its agribusiness, which could employ an extra 2 million people from this year to 2010, the highest in any sector.

Industry was not likely to contribute as much as services and agriculture to put a dent in unemployment in the next five years because of the huge investments required, she said.

Unemployment