Unemployment hits new 5-year high

JOBS, or a lack of them, can influence voters’ choices. So the fact that the number of unemployed in February reached a five-year high might be expected support the argument of critics of the current government’s employment policies. Market watchers, however, say the 12.97-percent jobless rate should be placed in context: jobless rates always tend to increase in January and February. Nevertheless, an unemployment rate close to 13 percent goes against predictions made by Prime Minister Robert Fico as recently as early March, when he hit an optimistic note and said that February would be the month when unemployment stopped growing.

JOBS, or a lack of them, can influence voters’ choices. So the fact that the number of unemployed in February reached a five-year high might be expected support the argument of critics of the current government’s employment policies. Market watchers, however, say the 12.97-percent jobless rate should be placed in context: jobless rates always tend to increase in January and February. Nevertheless, an unemployment rate close to 13 percent goes against predictions made by Prime Minister Robert Fico as recently as early March, when he hit an optimistic note and said that February would be the month when unemployment stopped growing.

While the 0.08-percentage points month-on-month growth in the jobless rate in February does not appear too daunting, the problems faced by Slovakia’s jobless will last much longer, with analysts expecting improvement only from the middle of the year. The jobless rate climbed by 3.25 percentage points between February 2009 and February 2010. The number of people registered at labour offices as unemployed and able to take jobs immediately stood at 348,419 in late February 2010. The army of jobless had thus grown by 2,040 people since January and by 90,855 from a year earlier, according to the Central Office of Labour.

The total number of people registered unemployed at the end of February stood at 396,205, up by 4,706 month-on-month. Compared to last February, Slovakia had an extra 106,597 jobless.

Statistical data on the country’s better economic performance in the last quarter of 2009 did improve prospects, especially since Slovakia has surpassed its regional cohorts and, to some extent, other countries in the eurozone.

The Slovak Statistics Office reported in mid February that the year-on-year contraction of Slovakia’s economy was less in the fourth quarter of 2009, at 2.7 percent, than in the third quarter of last year, when GDP contracted by 4.8 percent.

But market watchers say labour market recovery always lags behind the country’s economic performance.

“The February unemployment numbers have again convinced us that in terms of jobless data we cannot yet rely on the improving results of other economic indicators,” Poštová Banka analyst Eva Sadovská told The Slovak Spectator. “The reason is that the revival in the labour market follows economic revival only after a certain time.”

Sadovská said she believes that a revival in the labour market might emerge only in the second half of 2010.

“Until then the unemployment rate will keep climbing, most probably attacking the level of 13.5 percent,” said Sadovská. “In the second half of the year the unemployment rate might start declining, however the tempo of the drop will still be slow.”

It will take several years until Slovakia gets back to its pre-crisis rates. It will happen once firms again start hiring people driven by more certainty in terms of orders and the subsequent need for labour, she said.

“Until then, businesses will use their existing labour forces, already reduced under the influence of the global downturn,” Sadovská added.

However, the Central Labour Office said that the small month-on-month rise in the jobless rate does suggest some stabilisation and says there is reason for optimism in drops in registered unemployment at the regional level. Twenty-seven of Slovakia’s 79 districts posted a drop in their jobless rates. The jobless rate is now highest in southern Slovakia’s Rimavská Sobota district (Banská Bystrica Region), at 33.93 percent, and lowest in Bratislava, at 2.78 percent, the office reported.

Market watchers also suggest that after being stripped of seasonal influences the near-13-percent jobless rate might not appear so bleak.

While during the year unemployment grew steeply mainly due to the declining economy, in certain months seasonal influences also contributed to the trend. During winter, for instance, work traditionally drops off mainly in construction and agriculture, said Slovenská Sporiteľňa senior analyst Mária Valachyová.

The seasonally adjusted rate implies that unemployment has remained about constant during recent months, said Valachyová, confirming the labour office’s assessment of the rate.

“It means that with spring, and the continuing economic revival, new jobs might be created,” Valachyová told The Slovak Spectator, although she too confirmed that the revival would be rather gradual. “Average unemployment this year will be higher than last year.”

The market watchers say that the tempo of the revival in the labour market will depend on revival within the eurozone and Slovakia’s economy. Sadovská notes that the revival of Slovakia’s economy is conditional on a take-off among large European economies. With growing consumer demand from Slovakia’s main trading partners, production in Slovak industry will grow as well, she added.

“The flexibility of laid-off people themselves is important as well: how fast they can get reoriented in other sectors, travel for work or learn new things,” said Valachyová.

Sadovská also detects some positive signals about new investments or the expansion of production by Slovakia’s top businesses, specifically “those who are able to use the crisis for innovation, improve their products, change the specialisation of production or gain competitive advantage,” Sadovská said. “After the crisis it will be important to lure reviving consumer demand and leave behind the competition.”

However, there are certain risks in the evaporating effect of measures taken by the European economies to fight unemployment, she concluded.


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