Unemployment rate hits new low

The unemployment rate in Slovakia has been declining since summer 2016 while the number of economically active people has grown.

Illustrative stock photoIllustrative stock photo (Source: Sme)

The unemployment rate in Slovakia in January stood at 5.88 percent, reflecting a decline of 0.06 percentage points (p.p.) from 5.94 percent in December 2017.

The number of jobseekers immediately able to take up a job was 163,075 in January, an increase of 1,160 individuals month-on-month and a decline of 72,380 y-o-y, the Central Office of Labour, Social Affairs and Family (ÚPSVaR) general director, Marián Valentovič, told the TASR newswire on January 20.

The unemployment rate calculated from the total number of jobseekers amounted to 7.12 percent in January, down by 0.06 percentage points month-on-month and 2.93 year-on-year, he added. The total number of jobseekers reached 197,268 in the first month of 2018, down by 76,626 y-o-y.

Regional disparities and vacancies

As for individual regions, six out of the eight Slovak regions recorded cuts in their unemployment rates in January, with Košice Region experiencing the most significant drop.

In terms of districts, the unemployment rate declined in 52 of them, while 26 districts posted a growth in unemployment.

“A total of 74,963 job vacancies were available to jobseekers in late January, representing a year-on-year increase of 5,588,” said Valentovič at a press conference with Labour Minister Ján Richter in attendance, as quoted by TASR.

Valentovič added that the highest number of jobs were available in Bratislava Region, while the lowest were in Banská Bystrica Region.

Analyst: decline is a matter of statistic tools

The decline was merely the matter of statistics, Ľubomír Koršňák, macroeconomic market analyst of the UniCredit Bank Czech Republic and Slovakia, wrote in a memo, explaining that the number of economically active people is recorded and compared just once a year, in the beginning.

This year, their number has been increased to 46,000 people which then automatically pushed the unemployment rate down by 0.10 p.p. Thus, the unemployment rate declined at the beginning of 2018, but the absolute number of jobless people grew slightly.

It is still true, though, that the winter seasonal fluctuation has been reduced in recent years, as the tense situation on the labour market forces employers to keep at least some seasonal workers outside of high season, thus avoiding recruitment troubles, according to Koršňák.

Reasons behind decline in unemployment

The current decline in unemployment is mostly the result of cyclic revival of the economy, while the current economic growth demands increased labour. In the past decade, unemployment rates were affected differently by mass investments in modernisation of the economy.

After taking into account the usual seasonal factors (seasonal employees, lower activity during winter), the unemployment rate in Slovakia fell to 5.76 percent in January, according to a UniCredit Bank calculation. This confirmed that the decline in unemployment rate has slowed down slightly in recent months; it is now almost half the speed of last summer and spring.

Unemployment does not quite overlap with the demand for labour, Koršňák wrote, while adding that this is proven by the figures of vacancies and imports of workers from abroad. A bigger problem than the inapt education of the jobless is the unsuitable regional distribution of the unemployment.

Vacancies and foreign workers

The number of vacancies has been growing to almost 75,000, two-fifths of which can be attributed to the traditional restart of new job offers at the beginning of each year, which is reflected in the decline of the unemployment rate in the following months.

After taking into consideration the traditional season, the number of free jobs increased by four percent (i.e. 3,300). Compared to the same period last year, there were twice the numbers of job vacancies (95%). There are “only” 2.2 unemployed – who can immediately start working – per one job vacancy. However, the vacancies are mostly concentrated in the south-western part of the country, where there are not enough jobless people to fill them. Unsuitable education may not be such a big problem anymore, as the employers eager to hire new people are reducing their requirements and expectations.

The number of foreigners working in the country has been stabilised in the last months (due to traditionally lower winter activity on the labour market) at slightly under 50,000 (around 2 percent of all unemployed in Slovakia) but it has grown y-o-y by more than one-third (37 percent). Foreign employees are, again, concentrated mostly in the west of the country and come from countries outside of the European Union, mostly from Serbia, and more recently Ukraine.

The outlook is optimistic, as the growing economy should be able to generate new jobs and thus push the unemployment rate to new historical minimums.

The potential decline is hampered in most regions (especially in the west) by a lack of resources for the unemployed rather than the number of job vacancies.

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