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Manufacturing picks up, but jobs don't follow

The economy is picking up, but firms are still reluctant to start mass hirings. Instead, many businesses are trying to work with what (and who) they’ve got.

The government’s ambitious plan is to create some one million workplaces within ten years. On the shorter term, Prime Minister Viktor Orbán has promised 300,000 jobs by the end of 2014. The proposed new constitution states that every citizen has the right and obligation to hold a job. However, businesses do not seem inclined to follow the government’s plans: Hungary’s unemployment rate hit a record high of 11.5% again at the beginning of the year, following a period of declining joblessness last year.

Some segments of the Hungarian economy, such as tourism or construction are still far from recovered and still lack internal demand to speed up orders, thus it is no surprise that they have not started mass hirings yet. However, manufacturing is surely growing again. And yet, jobs are still far and few to come by.

Not industrious in hiring

At first glance, everything seems rosy in the heart of the Hungarian economy: after 18 months of constantly shrinking production in crisis, industry has now been steadily improving its output for 12 months. According to temp agencies and recruitment firms, hiring has accordingly restarted to some degree (see our articles in the special report). And indeed, manufacturing firms employed more people at the end of last year than in Q4 2009. How much more? A measly 3.7% more. Compared to the 592,000 manufacturing jobs in Q4 2009, barely 21,000 new people were needed at the end of last year to reach a growth in output of 14%.

Of course, this is partly because manufacturers kept on people they did not really, honestly need during the crisis because they did not want to let good people go. And of course, there are economies of size that only become available once you get a good strong demand for volume. However, the discrepancy between the growth of output and the growth of employment in manufacturing is still strikingly obvious.

Double-digit dole

This is all the more disturbing because analysts’ expect little change in current trends. Their prognosis was an unchanged 11.2% for the December-February period, a bit happier than the stark reality of 11.5%. As for the full year, analysts mostly remain in the two-digit area. Citibank’s country officer for Hungary, Batara Sianturi, told the Budapest Business Journal earlier that he expects a 10% unemployment rate for 2011. Kopint-Tárki analysts are even less optimistic with a 11% unemployment forecast. While the Economic Research Institute (GKI) foresees a 0.5% growth in employment in 2011, it puts the average unemployment rate for 2011 at 11.2%, „even in a best-case scenario”.

János István Tóth, research fellow at the Institute of Economics at the Hungarian Academy of Sciences, told the BBJ that he also does not expect the unemployment rate to drop significantly this year. Since the Hungarian economy is fundamentally export driven, and the world’s economic growth has not been as speedy as it was expected, the economic growth in Hungary has not been dynamic enough to decrease the unemployment rate, Tóth explained.

Also, Hungary is currently in a post-crisis reconstruction phase. Many companies do not develop but maintain their current level of operations, Tóth pointed out. This means they will increase their production but will not hire new staff, and will not take back those who were laid off during the crisis. The crisis had a deep impact on corporate strategies and firms will maintain a cost saving operation mode in the long run. Therefore, economic growth will not result in a major drop in unemployment, surely not on the short term.

Skilled staff needed

However, some recruitment companies see it differently. “Many companies have a (limited) growth strategy again and they are willing to hire,” said Ilona Jankovich, managing director of Randstad Hungary. R&D workers are for example in demand again: according to data from the statistics agency, there were 6,000 new jobs in science, engineering and research in the last quarter of 2010 compared to a year earlier. In the last few years, industrial, power electronics and consumer electronics firms have also started looking for such professionals in addition to the automotive industry, Jankovich said.

There is a shift from the previous trend of considering Hungary solely a service provider to a central investment location for manufacturing companies, especially those of the automotive sector, agreed Tammy Stellini, managing director of Hays Hungary. “Shared service centers are either increasing their headcount or some have set up and as a consequence there is a high demand for multilingual candidates.”

Hoping for a million

As for the long term perspectives of the Hungarian labor market, Tóth is doubtful of the economy’s current ability to radically expand employment. “Most of the people who are unemployed are not skilled workers, there is no work near to their home towns, and their education is at a very low level due to poor public education so that they will not be able to find a job now, and not even in ten years time.”

To create one million new workplaces, as the government plans, long-term, in-depth strategies are needed to reform the public education system so that it will release people who are ready to become skilled workers. This is not a five- or ten-year project, Tóth added.

Anna Szaniszló contributed to this article, which appeared in the BBJ's HR special edition on April 8, 2011.


Hungary’s unemployment rate was 11.5% in the 15-74 age group in December 2010-February 2011, up from 11.2% in November-January, according to data from the Central Statistical Office (KSH).  Even a year ago, when recovery was hardly in the pipeline, the rate was 11.4%. The jobless rate now rose for the third consecutive period after dropping to 10.7% in September-November last year.

The latest figures mark the second highest rate since January-March 2007, and the highest since January-March and February-April last year when the rate was 11.8% in both periods. The unemployment rate bottomed out at 7.5% in the summer of 2008 and rose to peak at 11.8% in the first months of 2010. The drop which followed slowed from May-July, and turned into a rise late last year.

The jobless rate for the 15-64 age group was 11.6% in December-February, up from also 11.2% in November-January, and up from 11.5% from a year ago. The rate for this age group peaked at 11.9% in Q1 2010 and after falling to 10.8% in September-November, started to increase again in October-December last year.

The employment rate in the 15-64 age group was 54.8% in December-February, down from 55.3% in the preceding period, but better than the 54.6% a year ago. The number of employed people in this age group fell to a corrected 3.712 million from 3.745 million in November-January. It was 3.695 million a year ago.

The growth of both unemployment and employment compared to one year ago reflects the fact that more and more people are registering as job seekers but some of them don’t find positions, KSH said. Of all unemployed, 52% have been chasing jobs since one year or more.

The average period of unemployment is 18.3 months, two months more than one year ago, KSH observed.Average unemployment in 2010 was 11.2%, up 1.2 percentage points from 2009.