The employment outlook deteriorated modestly in Q4’19, according to the latest quarterly report of Manpower, a recruitment firm. Only 4% of respondents said they would increase employment, down by 3pps y/y, while 2% said they would decrease personnel, up 1pp y/y. The net employment outlook remained positive, at +2pps, but it fell by 4pps y/y. In seasonally adjusted terms, the employment outlook decreased by 1pp q/q, also to +2pps, reaching its lowest level since Q2’18. The largest share of employers are still not going to change their employment policy though, reaching a total of 93% in Q4’19.
This time, the employment outlook declined across the board when company size is compared. In seasonally adjusted terms, only medium-sized companies (50-249 people) reported an improvement, up by 3pps q/q. As usual, medium-sized and large companies were the only ones to report a stronger net employment outlook, at +10pps (down 5pps y/y) and +18pps (down 12pps y/y), respectively. Across the country, Moravia seems be doing better than the rest of the country, which we believe is mostly due to Brno, which houses a lot of IT companies, which always draw additional personnel. Even there, the net employment outlook was only +4pps, lower by 2pps y/y, though higher by as much as 8pps q/q (sa). The situation is not much better in the sector breakdown, as most sectors reported a decline in annual terms, except restaurants and hotels, where the outlook was still negative, at -3pps, but better by 4pps y/y. There was a decline across the board in quarterly terms as well, even when accounting for seasonal factors.
Overall, the labor market is going to see slower employment growth, which is not something surprising at this point. Employment has been growing slowly even in times with stronger economic activity, mostly because of acute labor shortages. With external demand likely to deteriorate further, incentives to employ new personnel will decrease. We continue to believe that it will actually have positive effects initially, helping employers reduce labor cost growth somewhat. However, labor shortages will keep wages growing at a robust rate for some time more, so the effect won’t be that noticeable at first.