Vladimír Urbánek (Kurzy.cz)
Macroeconomics  |  June 08, 2011 10:55:25

Patria: Commentary on unemployment and wages


Unemployment continues to decline. In May, the number of unemployed fell below half a million, reaching 490 000 people. The unemployment rate along with it fell to 8.2 percent from the previous 8.6 percent. The numbers are in the same spirit as last month, although improvement than as pronounced as we saw in the April report. Labour market conditions getting better because of seasonal factors that work in construction, agriculture and services are in full swing. Czech economy also continues to expand driven by industry sector and even the latest data show employment growth.

Layoffs in the Czech economy continued gradually decreasing while the number of people who found work, remain polite. By the time the report is also continued growth in the number of vacancies, which creates room for improvement in the numbers coming months. Before the holidays, therefore, unemployment should fall on the border 8procentní before summer arrives transient increase.

In the first half of unemployment has dropped significantly, even more than in the first half of last year. Domestic demand in the labor market still does not give strong support. This is due to payroll growth remains relatively weak. In the first quarter, real wages increased by only 0.4 percent. The total payroll grew by 2.2 percent, but not much above the 1.7 percent inflation. This trend continues to speak rather in favor of slow improvement in household demand.

Thomas Wolf, Patria Finance



The average wage in the Czech economy in Q1 quarter of this year grew by 2.1 percent, but real improvement is only 0.4 percent.

The result negatively influenced primarily by savings in the public sector where budget savings have led to a decline in average wages by 1.7 percent in real terms by 3.3 percent. In this area, declining real wages for 4 quarters in a row. Roughly one could say that civil servants have become one of the first victim of fiscal consolidation.Reducing budget deficits painlessly and is not a political decision, where it will "hurt". Most notably, in the 1st quarter, real wages fell teachers (-7.9 percent).

No it's not even famous in the corporate sphere, where the average wage rose by 3.0 percent in real terms is about 1.3 percent. The fastest growing wages in agriculture (+7,7 percent), while in the financial sector wages fell by 3.5 percent.It shows that firms remain cautious in their wage policy and try to keep a lid on costs. Unemployment, although falling, is so high that it leaves no room for upward pressure on wages. As wage and price inflation due to remain low.

Development of employment and wage growth limit consumption expenditure of households, and therefore this part of the economic contribution to GDP growth.The absence of demand inflationary pressures while allowing the central bank to pursue a policy of low interest rates.

David Marek of Patria Finance

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