The basic objective of the article is to provide some evidence on the dynamic adjustment of the
Philippines’ regional labor markets to shocks. The response of labor markets to a negative labor demand
shock is very similar to the findings reported by [Blanchard, O., & Katz, L. (1992), Regional evolutions.
Brookings Papers on Economic Activity, 1, 1–61]. The initial impact is an increase of the unemployment rate
and a decrease of the participation rate and employment. Over time the participation and unemployment
rates return to their pre-shock levels while employment continues below for some time. The speed of
adjustment is faster than in Europe but slower than in the US. However, there are important regional
differences in the adjustment process. The second part of the article analyzes the determinants underemployment
among Philippines’ workers and its regional dimension.