The unemployment rate, measured by the labour force methodology for the 15-74 age group, decreased by 0.7pps y/y to 3.6% in June, the statistical office (KSH) reported. The unemployment rate continued inching down by 0.1pps m/m, which is below the usual for the season and at the backdrop of strong demand for workers, it indicates that the labour market is close to the natural rate of unemployment, in our opinion. There were 165,100 unemployed people during the period and their number fell by 16.0% y/y. The average duration of unemployment was 16.8x months, down from 17.9x months a month ago and the share of long-term unemployment remained high at 42.9% though falling from 45.3% last month.
The decline in unemployment was due to further increase in labour demand. Total employment rose by 1.2% y/y, and the pace of increase only marginally narrowed from the previous month. Employment growth on the domestic primary labour market continued slowing down slightly to 2.4% y/y. The stable growth of total employment was on account of a slower rate of contraction of the public work scheme.
Labour supply also continued increasing, partly alleviating the tightening pressure from the strong labour demand. The economically-active population expanded by 0.4% y/y during the period on the back of rising labour participation ratio. The participation ratio was up to 62.4% already exceeding the record high levels from mid-2017. We consider it possible that labour participation could increase further in the next months due to the government’s efforts to mobilise older-age people to the labour market. Nevertheless, skill mismatches and strong employment outlook are likely to keep the labour market tight in the medium term, in our view.