The unemployment rate, measured by the labor force methodology for the 15-74 age group, fell by 0.8pps y/y to 4.1% in September, the statistical office (KSH) reported. The rate was also down by 0.1% m/m, which we think was somewhat weaker than the usual seasonal decline for this period. There were 188,500 unemployed and their number fell by 16.8% y/y. The average duration of unemployment continued to decline to 15.4x months while the share of long-term unemployment rose slightly to 40.6%. The still high share of long-term unemployment could reduce the potential for further decline in the unemployment rate, in our view. Some 19.4% of the unemployed never had regular work, the KSH data showed. Moreover, the labor market seems to be already quite close to full employment, which economy minister Mihaly Varga associated with an unemployment rate of 3-4%.
We think there is still some room for further reduction in the unemployment rate but rising labor supply is likely to limit this process. The labor force expanded by 0.5% y/y in September due to a rising participation rate, which we think was stimulated by the favorable job opportunities and rising wages. The participation rate reached 62.3%, which is a record high level.
Employment growth has stabilized in the past three months and rose by 1.4% y/y in September, explaining the decline in unemployment. The negative impact of the strong wage hike on labor demand therefore seems to have waned, in our view. Employment on the domestic primary labor market maintained healthy growth of 2.4% y/y in September while employment by the public work scheme fell by 15.4% y/y and employment by local units abroad was down by 2.1% y/y. In terms of sectors, employment growth was driven mostly by manufacturing and construction. Growth of employment by the agriculture and market services sectors was more subdued but still positive while employment in the public services sector fell by 1.8% y/y.