The Hungarian unemployment rate shows only an incremental increase, despite the latest round of lay-offs due to automation and digitalization in the business sector.
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The unemployment rate of the 15–64 age group came in at 3.5% in October - a 0.2 percentage point drop on a year-on-year basis. It also shows a 0.04ppt increase compared to the previous month.
Overall, we can say that the labor market stabilized around the recent unemployment level, but the truth is that we can see a minor increasing trend in the time series. In our view, this development is tied to the recent changes among the most productive companies, as they roll out the latest digitalization and automation projects, and we see headlines about lay-offs. However, the vast majority of the freed-up labor force has been absorbed by the less productive, yet labor-intensive companies.
The number of employed people is hovering around 4.44 million, showing only a 0.1% increase year-on-year. This also supports our view, that the fluctuation is rather happening within the employed group rather than having new entrants in the labor market.
Labour market trends (%)
Source: HCSO, ING
On the details, the number of workers on the primary labor market was up by 29.7k year-on-year, a significant deceleration in the pace of improvement. The number of fostered workers (who are working in state-financed, low skilled jobs for less than the minimum wage) came in at 110.8k, a minor increase compared to the previous month.
We see the labor market to maintain its strong footing as long as the Hungarian economy is booming at the recent (or close to recent) rates. Constant improvement in productivity supports potential growth, while also provides new (just laid-off) labor force for the less productive companies, who are suffering from a labor shortage.
Against this backdrop, the majority of the business sector can be a winner, while the unemployment rate can be maintained around 3.5% in 2019 and 2020.
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