Unemployment rate falls by 1.2pps y/y in Hungary

The unemployment rate, measured by the labor force (LFS) methodology for the 15-74 age group, fell by 1.2pps y/y to 4.6% in April, the statistical office (KSH) reported. On a m/m basis, however, the unemployment rate was up by 1pp, which we think could be considered contrary to the usual seasonal trend for this period. We think that part of the higher unemployment might be due to narrower scope of the public work program. Still, the data might also suggest that the further reduction in unemployment could be difficult because of structural rigidities and continued increase in labor demand could translate into stronger pressure on wages, in our opinion.

There were 209,000 unemployed people in the period and their number fell by 21.1% y/y. The average duration of unemployment was 17.0x months and the share of long-term unemployment remained relatively high at 44.8%. The reduction in unemployment was partly constrained by continued expansion of the labor force, boosted by increasing labor participation. The participation rate was up by 0.7pps y/y but it has stayed quite stable in the past ten months, in our view possibly indicating that there might be limited additional upward potential.

Persistent healthy labor demand was behind the y/y decline in the unemployment rate. The number of employed rose by 2.0% y/y although its growth slowed down for the third straight period. We think that the slowdown of growth should be partly linked to the public work scheme while previous data showed that private labor demand also weakened recently but still increased. According to the LFS figures, employment on the domestic primary labor market still increased by 2.6% y/y in April and slowed down from the previous period. Employment of the public work scheme was down by 5.0% y/y and employment at local units abroad fell by 7.8% y/y.

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