Labor Market Shows no Sign of Economic Slowdown


According to the government, the latest unemployment figures do not suggest that the Hungarian economy is about to slow down anytime soon; however, some international institutions are still not convinced about the sustainability of the current growth rate: Moody’s did not give an upgrade to the sovereign debt rate of Hungary in its latest scheduled review.

Hungary’s three-month rolling average jobless rate was 3.5% in July-September, up slightly from 3.4% in the preceding three-month period, but still down from 3.8% in the corresponding months in 2018, the Central Statistical Office (KSH) said.  

The indicators for women improved significantly, while unemployment practically stagnated among men. The jobless rate in the 15-24 age group stood at 11.4%, up 0.7 of a percentage point year-on-year, with this age group accounting for almost one-quarter of the total.  

The unemployment rate in the 25–54 age group, i.e. people belonging to the “best working age”, decreased by 0.4 of a percentage point to 3%, while the jobless rate among people aged 55–74 decreased by 0.5 of a percentage point to 2.2%.

As for a regional breakdown, the unemployment rate stagnated or decreased slightly in most regions of Hungary, with the largest change occurring in Budapest, where the rate declined by 1.4 pp to 2.1%.

The average number of employed people was 4,521,000 in July–September, some 34,200, or 0.8%, more than a year earlier. The increase in the domestic primary labor market was 49,200 (up 1.2%), while the number of those working abroad rose by 13,800 (up 13.1%). The number of people declaring work in public employment schemes decreased by 28,700 (down 21%).

No Slowdown

There are no signs of an economic slowdown on the labor market, analysts said in reacting to the fresh data. While in other areas, such as on the construction market or in the retail sector, some early signs of such slowdown might be detected, it will only become clear further in the future whether the slowing economies of Western Europe will have an effect on the Hungarian employment market, they claim.

According to Péter Virovácz, head analyst with ING Bank, while surveys show that companies might cut back on employment later, that is not indicated in the latest figures. As for the rest of the year, he thinks that the unemployment rate is unlikely to fall further, and it will most probably stagnate in 2020 as well.  

Takarékbank head analyst András Horváth said that further expansion of the labor market is halted by the stretched employment rate; the latter, according to him, could be improved by about 4 pp compared to the main rivals in the European Union.  

Erste Bank analyst Orsolya Nyeste said that latest data shows that the Hungarian economy is still in a state of full employment. According to her, the main question in the coming months is whether the possible negative effects of the slowing Western European economies will lead to a deterioration in the tight Hungarian labor market.   

The Hungarian government also emphasized that no worrying signs can be read from the latest labor market data.

“The number of people in employment has increased by more than 811,000 since 2010, of which the increase within the private sector exceeded 700,000 people; this has contributed significantly to fact that the Hungarian economy is performing outstandingly even at European level,” Minister of Finance Mihály Varga commented on the latest figures.  

Another Record

The number of people in employment has set another record, with 4. 521 million people now working in Hungary, while the rate of employment has increased to its highest ever level of 70.3%, he added.

In spite of the optimistic analysts’ opinion, and with several international institutions having raised their growth projections for the Hungarian economy, it seems that all this had not convinced one of the larger international rating agencies.  

Moody’s Investors Services’ last review for this year was scheduled for October 28, but the agency decided to leave Hungary’s sovereign rating unchanged at “Baaa3” with stable outlook. Moody’s also left the rate unchanged at its earlier review in May. The last time the agency did update Hungary’s rating was in November 2016, when it was changed from “Ba1” to the current level, lifting Hungary above the investment grade threshold.  

Other rating agencies seem to have more trust in the Hungarian economy though: at the beginning of the year, both S&P and Fitch decided to upgrade Hungary to “BBB” with a stable outlook.

Numbers to Watch in the Coming Weeks

The beginning of November will see two interesting macro figures: first, on November 6, we will find out how the retail sector performed in September. Two days later, on November 8, the Central Statistical Office (KSH) will shed light on the September performance of the Hungarian industry; the latter figure showed a slight slowdown at the end of the summer. Also on November 8, consumer prices for October will be published. In mid-November, we will discover whether the weaker construction sector was able to come back to life in the first month of the fall. Even more interesting is how the economy performed in the third quarter: a flash estimate will be released by KSH on November 14.

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