The registered unemployment rate decreased by 2.6pps y/y to 9.6% at the end of December, according to the preliminary statistical office data released today. The print was however 0.2pps higher than that reported in at end-November, which is not surprising in view of the end of the active tourist and construction season with the end of the summer. The print is also 0.1pp higher than our initial estimates that assumed no change in the labor force from November. Thus, the unemployment rate is at the one-digit territory for the eighth month in a row. The number of the unemployed people decreased by 20.5% y/y in December with the pace of increase easing by 21.9% y/y in November, which is positive news in view of the end of the active tourist and construction season. Double-digit paces of contraction in the number of the unemployed people have been observed since January 2016 with the peak of 22.9% annual drop being reported in June 2017. These robust paces of decrease may be kept also in January, but it is more likely that they will gradually ease in the next months as the seasonal job positions are closed. Meanwhile, the number of employed people rose by 4.5% y/y to 1.405mn in December, easing from 3.6% y/y in the previous month, whereas the number of employed persons in legal entities, which constitute the bulk of the employed, rose by stronger 5.3% y/y (4.2% y/y in November). Further on the positive note, for the eighth consecutive month since January 2016 the labor force increased by 1.44% y/y with the pace speeding up from 0.5% y/y in November. The continuing growth is positive news in view of the end of the tourist, agriculture and construction season.
The jobless rate will likely continue declining on annual basis as GDP is expected to continue increasing in the near future, which should support job creation. At the same time, we may expect the unemployment rate to continue to moderately increase in monthly terms in the next few months as the seasonal job positions are still closed. Other factors that could potentially have negative impact on the labor market developments could stem from the restructuring of ailing shipbuilder Uljanik and of dominant oil company INA’s refinery in Sisak. Moreover, the labor market suffers structural issues such as inadequacy of the labor force education and training to the labor market needs. So, while demand for new workers may be expected to remain relatively stable in the next couple of months, employers in a number of sectors (construction, tourism, shipbuilding, ICT) are likely to continue to complain of lack of skilled personnel as meanwhile the government has not yet implemented key structural reform measures to improve the match between the education system and the labor market but only raised the quotas for foreign workers which is nothing to do with long-term sustainable solution to the problem, in our view.