The unemployment rate, measured by the labor force methodology for the 15-74 age group, fell by 1.7pps y/y to 4.4% in February, the statistical office (KSH) reported. It was up by 0.1pps m/m, which was the first m/m increase since Q1/2015. The m/m increase was nevertheless quite small and we think it could be to some extent explained with seasonal fluctuations or a reduction of the scope of the public work program. We do not consider it as a signal for upturn of the downward trend in unemployment but we certainly believe that further decline in unemployment will be difficult because of labor skill mismatches as evidenced by the relatively high share of long-term unemployment.
There were 202,500 unemployed in February and their number declined by 26.4% y/y. The share of long-term unemployed was 47.2%. The average duration of unemployment was 17.8x months and was little change compared to the previous few months.
The y/y decline in unemployment was mainly because a continued strong labor demand. Total employment growth in the economy rose by 3.1% y/y in February. Growth, however, slowed down from the previous period, which we think might be on account of the government’s efforts to reduce public employment and re-direct workers to the primary labor market in order to alleviate labor shortages. Accordingly, employment on the domestic primary labor market rose by 3.7% y/y during the period while employment by the public work scheme fell by 6.3% y/y. The number of workers at domestic companies abroad fell by 0.4% y/y in February.