Unemployment rate falls to 4.4% in December in Hungary

The unemployment rate, measured by the labor force methodology for the 15-74 age group, fell by 1.8pps y/y to 4.4% in December, the statistical office (KSH) reported. The rate was down by 0.1pps m/m, which we think was consistent with the usual seasonal trend. The number of unemployed fell by 27.0% y/y to 205,000 people during the period. The average duration of unemployment was 17.9 months and a still high 46.6% of the unemployed people were long-term unemployed. We continue to think that the data suggests a relatively high level of structural unemployment, which implies that the labor market is currently in an overheating phase.

Labor supply continued to expand, rising by 1.7% y/y in December on account of a further increase in the activity rate. The labor participation rate rose by 1.2pps y/y to 61.5% for the period, in our opinion stimulated by favorable employment opportunities and rising wages. On the other hand, labor demand maintained dynamic growth as well, rising by 3.6% y/y in December. Employment growth seemed to accelerate again in the past three periods, which we think should be rather on account of improving private sector demand.

Public employment fell by 6.3% y/y in Q4, the KSH data showed, which we think referred entirely to the public work scheme. The number of people working not in public employment rose at a strengthening rate of 4.1% y/y during the quarter, with rising labor demand from manufacturing as well as market and public services. Employment also rose in the agriculture and construction sectors in Q4, but at a decelerating pace.

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