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Rise in unemployment rate to sixteen-year high surprises analysts

The rise of Hungary's November-January unemployment rate to a sixteen-year high of 11.4% surprised analysts, who predicted that unemployment would continue to increase until the start of seasonal hiring this spring and summer.

Hungary's Central Statistical Office (KSH) reported that Hungary's average unemployment rate in the 15-74 age group was 11.4% in December-February, up sharply from 10.8% in November-January.

Gergely Suppan of Takarékbank said that the market expected unemployment of 11% or lower for the period, speculating that a change in conditions surrounding the age at which Hungarians can retire and administrative factors may have contributed to the unexpected jump in the number of unemployed.

Suppan predicted that Hungary's unemployment rate would continue to rise through March as a result of seasonal effects and a decline in domestic demand, though could dip below 11% with the subsequent beginning of seasonal agricultural and construction work and the start of the summer holiday season.

Dávid Németh of ING Bank attributed the higher-than-expected November-January unemployment rate to further employment cuts in the private sector, noting that Hungary's Road to Work program was no longer capable of counterbalancing these private-sector losses.

Németh predicted that seasonal factors could drive Hungary's unemployment rate up to around 12% in March-April, noting as his Takarékbank peer that the beginning of summer seasonal employment should serve to reduce unemployment to some degree. The ING Bank analyst cautioned, however, that the construction sector is unlikely to add as many seasonal jobs in 2010 as in previous years.

Németh forecast unemployment of between 11% and 11.5% at year's end. (MTI – Econews)