In Czech Republic net employment outlook deteriorates in Q1’19

The net employment outlook deteriorated, down from 6pps in Q4’18 to 2pps in Q1’19, according to the latest Manpower Employment Outlook report. In seasonally adjusted terms, the deterioration was visibly smaller, at 2pps q/q, but employment prospects are still lower. The decline comes mostly from the share of employers who intend to increase staff, which fell by 3pps q/q to 4% of total, while those who intend to reduce staff were higher by 1pp q/q, up to 2%. By company size, the biggest reduction was at the smallest (up to 10 employees) and highest level (at least 250 employees). Small- and medium-sized companies reported growth in both employment prospects and net employment outlook, as they are looking towards expanding activity. Meanwhile, labor shortages are expectedly affecting micro companies, which cannot offer favorable remuneration, as well as large ones, where promotion prospects are usually more limited. Regionally, only Prague has seen a very slight retreat in hiring prospects, while the remaining part of the country, particularly Moravia, has seen a considerable decline, even a neutral employment outlook in Moravia.

There was a decline of net employment outlook across the board in a sector breakdown. Finance and accommodation seem to be reporting a negative employment outlook, though when seasonally adjusted, the only area where employment is expected to decline is agriculture. The latter is probably due to the lots of fires reported this summer due to high temperatures, which harmed this year’s harvest considerably and some companies are probably going out of business or downsizing substantially. Construction, utilities and to a lesser extent manufacturing are the leading sectors in terms of employment prospects.

Overall, developments shouldn’t surprise, as the labor market is still very much overheated. Labour costs are only going to grow, reaching a point where some companies may be forced to go out of business because they cannot afford skilled labor. As the labor market doesn’t show signs of improvement and unemployment remains at a record low, we doubt that labor cost pressure will decrease any time soon.

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