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Jobless numbers may be too upbeat

The government announced the best employment figures in 23 years, but some of the progress may be due to changes in the method for counting. Analysts say there is still room for improvement in hiring.

Worker’s at ContiTech Fluid Automotive Kft. In Makó on September 2. ContiTech recently invested HUF 5 billion in its facilities in Makó and Nyíregyházá, with HUF 1.5 bln in government support. The facilities contribute to the economy by providing employment for roughly 2,000 workers.

Growth outlook less rosy

The slow down of the Hungarian economy that started in the second quarter of 2015 will continue, GKI Economic Research Institute predicts in its latest forecast. After 3.6% growth in 2014, the figure will be 2.7% in 2015 and around 2% in 2016, mainly due to the stagnation or decline of investments. In addition, uncertainties are increasing in the world economy as well. In the second quarter of 2015 both the general government deficit and the government debt increased. However, the external balance was favorable, and deflation was over, the think-tank noted in its prognosis.

The last days of summer saw quite good macro data, including employment figures, investment data and foreign trade balance. These should, however, be taken with a pinch of salt: The nearly quarter-century high employment figures include public workers and those working abroad, and investment data also shows a mixed picture.

Still, the country could boast a record low unemployment rate and record high employment, according to the latest figures released by the Central Statistics Office. Employment was recorded at a 23-year high between May and July this year, paired with an 11-year-low unemployment rate of 6.8%.

The number of people in employment has been above the four million mark for one-and-a-half years in Hungary, the Ministry for National Economy noted in a press release. In May-July 2015, the number of those aged 15-74 years in employment grew by 139,000, to 4,224,000 year-on-year. The number of people in employment is more than 500,000 higher than in 2010, the ministry noted.

The unemployment rate also declined further, to 6.8%. The number of unemployed averaged 305,800 in May-July this year, while the number of employed averaged 4,223,800. The employment rate of those aged 15-24 years was up by 2.5 percentage points, to 25.5%, and thus the number of people with a job in this age group totaled 281,000.

There were 3,009,600 economically inactive Hungarians – those neither employed nor seeking jobs – in the age group during the period, down from 3,132,900 a year earlier. At the same time, the activity rate rose to 60.1% from 58.6%.

More time spent looking for work

In spite of the favorable figures and the increasing number of public workers, the average time spent looking for work was 19.3 months, up from 18.2; 48.2% of those unemployed had been seeking work for one year or more.

Takarékbank analyst András Oszlay thinks the unemployment rate could improve further in the second half of 2015, falling close to 6% by the fourth quarter and averaging 6.8% as against 7.7% in 2014. He attributed the dynamic improvement half and half to strengthening economic performance and to active employment policy measures such as the public work schemes. Vivien Barczel of Erste Bank said the jobless rate could fall to 6.5-6.6% by the end of the year and expects an average unemployment rate of 7% in 2015.

However, it is important to note that if the 222,000 public workers and 111,000 Hungarians working abroad are not counted in the working scheme, Hungary saw employment of 3.890 million in May-July, which is way below the data measured in the same period of the last pre-crisis year, 2006, when 3.935 million people were employed. Also, the population has declined by 178,000 in the age group of 15-74 years.