Hungary: Unemployment at record low

The unemployment rate of the 15–64 age group came in at 3.4% at the end of 1H19, showing a 0.2 percentage point decline in 12 months. While this marks a new record low level, the improvement is marginal. The better-than-expected reading is due to falling unemployment among women while joblessness among men stagnated. This suggests that the potential labour reserve is clearly depleting and even a marginal improvement will be really challenging. Moreover, if we add the expected domestic and global slowdown into the picture, the labour market might stop showing any improvement at all quite soon.

The structure of the labour market also supports our view that the continued improvement will stop sooner rather than later. The number of workers on the primary labour market increased further by 84.5k year-on-year. This is a good number but still significantly lower than that registered in previous years. The number of fostered workers (who are working in state-financed, low skilled jobs for less than the minimum wage) dropped to 108.7k, another sign of a depleting potential labour reserve. Moreover, among the 155k unemployed, almost 36% has been trying to find a job for more than a year, meaning that there is a glaring structural mismatch in the labour market.