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Monday, June 30, 2008

Hungary Employment and Unemployment March-May 2008

Hungary's unemployment rate for the 15 to 64 age group held constant at 7.8% in the March-May period, the same as in February-April, according to data from the Central Statistics Office (KSH) earlier today. The number of those unemployed was 321,700 and the number of employed was 3,827,200. This latter figure compares with 3,820,800 in February-April and 3,890,500 in the same period in 2007. The number of unemployed dropped by 1,700 from the previous 3 month period but was up by 14,200 from the reading in the same period of last year.

The participation rate for the 15-64 population was 61,1% in March-May, up from 61 in February-April, but down 0.6 ppts from the same period in 2007. The employment rate of the population aged 15-64 was 56.3%, as against 56.2% in the previous 3 month period and down 0.9ppt from March-May 2007.

The KSH said 48.4% of all unemployed have been seeking jobs for a year or more (up from 47.3% in the previous 3 months). The average duration of joblessness was 17.8 months, up from 17.1 in the previous 3-m period.

So as we can see from the chart below, despite the fall in the number of unemployed, levels of employment are actually now substantially down from where they were one year ago.

The reason for this is quite straight forward, the 15-64 working age population in Hungary is now in more or less continuous decline, while the participation rate among that population is down slightly.

Now the supply-side macro economics of what happens next are actually remarkably simple. Either Hungary significantly raises productivity among the work force as it contracts, or it substantially increases employment participation rates among the working age population (or both), or headline rates of GDP growth will remain very low.

Now the latest year for which we really have productivity stats is 2006, and as can be seen from the chart below - which is expressed in purchasing power standards relative to other EU countries (Eurostat data) and is only for comparative purposes - while there was quite a burst of productivity improvement between 1999 and 2004, the rate actually started to slow between 2005 and 2006, and give the substantial growth slowdown in 2007, it is very probable that this slowdown continued in 2007, although we don't yet have actual data.

The OECD on the other hand do present year on year changes in easy manageable form, and again we can note a slight slowing in productivity growth since 2004. So this is the task ahead, to turn this trend round.

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