The unemployment rate in Israel jumped to its highest level in the last year and stood at 4.3% in October, compared to 3.9% in September – according to data published by the Central Bureau of Statistics at the beginning of the week. Although it is still a low level of unemployment, the employment market in Israel has been in a creeping erosion trend for the past six months, since the unemployment rate was at a low of 3.1% in April.
Do the data reflect the beginning of a crisis or are these just slight fluctuations in the statistics? The month of October is usually characterized by volatility due to the Tishrei holidays, when activity in the economy decreases and fewer people are defined as “working” according to the CBS definitions. However, even excluding seasonality, the percentage of the unemployed among the entire labor force in Israel jumped within a month from 3.8% to 4.1 %.
Will the election results lead to an update of the forecasts?
One of the estimates is that the interest rate increases by the Bank of Israel, to the level of 2.75% today, started to slow down economic activity in a way that tightened the employment market. Even if this cannot fully explain the data, the central bank will have to take into account the trend in the unemployment rate in preparation for the next interest rate decision in a week.
A forecast published by the research division of the Bank of Israel last month foresees a slowdown in the employment market next year. “At the starting point of the forecast, the labor market is tight with an employment rate in the prime working ages higher than that which prevailed on the eve of the corona crisis and an unemployment rate lower than that which prevailed in that period,” the bank wrote.
“In the forecast range, we estimate that the labor market will remain tight but will gradually return to the levels that characterized it before the corona crisis. In particular, we expect the unemployment rate to rise to 3.5% on average in 2023.” Meanwhile, the latest figures are already outpacing forecasts.
It is possible that the Bank of Israel needs to update the forecasts in light of the election results and the stated intentions of the coalition being formed to increase the subsidy for the sheep.
Today, only about half of the ultra-Orthodox men work, while over the years a certain correlation can be seen between the government support for yeshiva students and the employment trends in ultra-Orthodox society. It is not unreasonable to assume that once again the increase in support for the financing of Torah studies will contribute to reducing the motivation to enter the labor market, among ultra-Orthodox society.
The difficulties in high-tech are slowing down the economy
With news of global layoffs at giants like Facebook and Twitter in the background, the difficulties in high-tech are starting to slow down the locomotive of the Israeli economy. “We feel the buds of the crisis,” refers to the increase in the unemployment rate, BDO’s chief economist, Chen Herzog.
Herzog explains that “the effect of the slowdown in high-tech, which started even before the interest rate hike and the interest rate intensified it, caused the high-tech companies to put pressure on the brakes. This also permeates the circles that provide service to the high-tech. And when high-tech slows down, the rest of the economy also slows down. Although an unemployment rate of 4.3% is still considered full employment, But there is an indication that the economy is entering a process of streamlining that puts pressure on the manpower in companies.”
Along with the unemployment percentages, the CBS publication also reports on the employment rate of the entire population. This index dropped in October to 60.3%, compared to 61.2% in September. Each unemployment percentage represents close to 40 thousand people. This means that within a month about 13,600 more were added Israelis to the circle of unemployment, which encompassed 186,400 men and women in October.