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Friday, May 16, 2008

Hungary Wages and Employment March 2008

Slower wage raises in the Hungarian private sector meant that the rate of wage increases in the Hungarian economy slowed significantly in March. The average gross wage increased by 9.9% in March compared to a 13.1% rise in February, the Central Statistical Office said today. Inflation risks from wages were thus reduced slightly in March - and especially in the area of the ex-bonus annual wage rise in the business sector, which the central bank considers crucially important, and which decreased from 10.4% growth in February to 7.7% in March.

These result might well be thought to decrease base-rate hike expectations. This view is supported, among other factors, by the recent statements of vice-governor of NBH and Monetary Council member, Júlia Király, who indicated in a Reuters interview this morning that the base rate hike cycle will obviously reach its end sooner or later. This is clearly true, but it may well be significant that she is flagging this now.

Regular wage rises in the business sector are now the lowest since June of 2006. György Surányi, former NBH governor also expressed his doubts about the likelihood of double digit regular wage hikes in tha private sector in an interview published this morning.

The effect of the slowly decreasing inflation and the dynamic growth of net wages together led the real wage index (ie wage rises minus inflation) above zero in February. This index had been negative for quite some time now. In March, the annual increase of net wages, 8.7%, was slightly higher than the level of the annual inflation, 6.7%, which decreased a bit the real wage index in the last month. Between January and March 2007, real wages decreased by 0.7% on a yearly basis.

The number of workers employed increased to 2,747,000, up by 9,000 on February, but this level is still 1% lower than last March. In the public sector, lay-offs seem to have stopped. The number of public sector employees was back near 720,000, partly as a result of seasonal factors according to KSH.

In January–March 2008, some 1 million 941 thousand people worked in the private sector and 715 thousand in the public sector. The staff number of budgetary institutions on the whole decreased by nearly 5.6% while in the private sector it practically stagnated.

In the private sector there were 1,944,500 people employed, an increase of only 0.4% on the number employed in March 2007.

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