Analysts: Unemployment growth could signal economic downturn in Czechia

Unemployment in the Czech Republic rose slightly in September to 3.5 percent, up from 3.4 percent in August. Czech analysts say that the numbers mark the first time since 2013 when the unemployment figures for September were higher than for August, which could signal the beginning of an economic downturn for Czechia.

Though it seems like a small change, unemployment typically decreases in September, according to Czech Banking Association analyst Jakub Seidler who told the Czech Press Agency (ČTK) the numbers are unusual for this time of year.

"This is the first increase in unemployment between August and September since 2013. Even in the Covid year of 2020, the unemployment rate in September was stagnant compared to August, while in other years it always fell slightly," said Seidler. 

The Czech Labor Office said future unemployment numbers will depend on the course of the war in Ukraine, the worsening of the pandemic situation, and the impact of the energy crisis on employers. 

In September employers offered 306,098 vacancies, a decrease of roughly 6,200 compared to the previous month, shows data released by CZSO Monday. Last September, unemployment was also 3.5 percent, with 262,142 people looking for work.

Economists say that September is the month when unemployment tends to decrease due to seasonal indicators. But as seasonal work ends, employers have been slow to recruit temporary autumn workers for Christmas work.

Martin Jánský, CEO of the staffing agency Randstad Czech Republic told ČTK this could mean a couple of things. "People either don't have the finances for pre-Christmas shopping, or they spend while waiting for the number of expenses for energy deposits," he said.

While the primary wave of new graduates (which this year means 15,490 people) of varying education levels appeared on the records books of the Czech Labor Office in September, their numbers didn't impact the development of the labor market significantly.

Since the beginning of the war in Ukraine in February, 131,704 refugees from Ukraine have found work in the Czech Republic said the labor office. However, a number of refugees have already returned home or left those jobs. By the end of September, 88,909 Ukrainians with temporary protection were working in the Czech Republic.

The Czech labor market is currently seeing demand for blue-collar professions, particularly in the manufacturing and construction sectors. Seasonal workers in construction, agriculture, forestry, and catering are still in high demand. 

CZSO data also highlighted several other notable patterns: Almost 56 percent of the people registered with the employment offices were women. The average age of the unemployed was 42.9 years in September, this time last year it was 42.8 years. 

People with lower qualifications, especially those without a high school diploma and with basic education, represented the largest proportion of people who were unemployed.

The highest regional unemployment rate is in the Ústí region, where unemployment is at 5.3 percent. The Moravian-Silesian Region followed with an unemployment rate of 4.9 percent. The data is unchanged from last year and according to the Labor Office corresponds with the long-term economic outlook of the area.

The region with the lowest unemployment rate was Pardubice at 2.5 percent.

Among the districts, Prague-East had an unemployment rate of only 1.5 percent. Pelhřimov, Praha-západ, Rychnov nad Kněžnou, and Benešov also fell below two percent. 

At the opposite end is Karvina with an unemployment rate of 8.3 percent. The number reflects more than ten applicants per one job vacancy. In the districts of Praha-East and Mladá Boleslav, there are currently only 0.2 applicants for one vacant position.

For the entire year 2021, the average unemployment rate in the Czech economy was 3.8 percent, which represented a slight increase from 3.6 percent in 2020.

Economists say that while unemployment will increase slightly in the coming months as a result of the economic slowdown, widespread layoffs are unlikely. 

"Unemployment may continue to grow slightly, but thanks to the strong position of the labor market, we expect only a gradual pace and a sudden change," Raiffeisenbank analyst Vratislav Zámiš told ČTK.