The registered unemployment rate decreased by 2.5pps y/y to 9.1% at the end of October, according to the preliminary statistical office data released today. The print was however 0.7pps higher than that reported in September, which is not surprising in view of the end of the active tourist and construction season with the end of the summer. Moreover, the new school and university graduates start enter the labor market in the autumn. The print also matches our initial estimates that assumed no change in the labor force from September. Thus, the unemployment rate is at the one-digit territory for the sixth consecutive month. The number of the unemployed people decreased by 21.5% y/y in October with the pace somewhat easing from 22.7% y/y in September, which is in line with end of the active tourist 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 November, but it is more likely that they will gradually ease in the next months as the seasonal job positions are slowly being closed. Meanwhile, the number of employed people rose by 3.2% y/y to 1.423mn in October, a pace of increase broadly unchanged for a couple of months, whereas the number of employed persons in legal entities, which constitute the bulk of the employed, rose by stronger 3.7% y/y. Further on the positive note, for the fifth month running since January 2016 the labor force increased by 0.34% y/y with the pace slightly speeding up from 0.3% y/y in September. The continuing growth is positive news in view of the ending tourist season, but might be reflecting the still ongoing seasonal activities in agriculture, namely those related to the harvesting of the crops. It is yet to be seen whether the measures to activate the unemployed people, to encourage the take-up of job and to improve the matching between the education system and the labor market needs have been productive.
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 resume moderate increase in monthly terms in the next months as the seasonal job positions are being gradually 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 refineries in Rijeka and Sisak. Moreover, new school and university graduates are to enter the labor market in the autumn months, thus preventing unemployment rate monthly decline. Last but not least, 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 high, 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.