LFS-unemployment rate declines to record-low 14.1% in Montenegro

The survey-based unemployment rate declined to record-low 14.1% in Q3 from 14.4% in the previous quarter, according to the new labor force survey by Monstat. The unemployment rate was also lower compared to 14.8% in Q3’17, which suggest that the labor market performance has improved over the past year. We note that the robust performance of the tourism sector contributes to the improved performance of the labor market in the summer months. The unemployment rate is usually lowest in Q3 during the height of the tourist season.

The total labor force numbered 287,800 people, of which 247,200 employees and 40,600 jobless. The number of unemployed fell by 2.9% y/y but increased by 0.2% in quarterly terms. We note that the labor force also increased by 2.2% y/y. The activity rate improved to 57.6% in Q3 from 56.2% in Q2, partly due to the increased opportunities for seasonal jobs, which prompted some Montenegrins to join the labor force. We also note the number of employed rose by 3.1% y/y and by 2.9% q/q, which shows that the improving economic activity has prompted companies to increase hiring.

Youth unemployment remains a serious problem in the country with 26.8% of the population aged between 15-24 being jobless. The survey once again confirmed huge labor market disproportion with the unemployment rate being at low 3.2% in the tourism-heavy coastal region, at 8.5% in the central region including the capital Podgorica (8.6%) and at very high at 36.3% in the poor Northern region. We note that the labor market performance in the coastal and central regions has been improving much stronger compared to the Northern region, which remains underdeveloped. Services sector provided 73.4% of all jobs, followed by industry (18.6%) and agriculture (8.0%). Some 59.5% of all jobless have been looking for a job for more than two years, which means that long-term unemployment remains a very serious problem in the country and is likely to prevent a more significant reduction of the LFS unemployment rate.

The government was very upbeat that the realization of new infrastructure projects will help cut the jobless rate but the highway project’s impact on employment was curbed by the high share of Chinese workers that the Chinese contractor brought with it. Still, the most recent data show that the labor market performance is improving in line with the improving economic activity. However, we expect the unemployment rate to remain high outside the tourist season as structural problems persist.

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