Unemployment rate falls to 20-year low

The August unemployment rate fell to 6.1%, the lowest in two decades under the Central Bureau of Statistics' new methodology.

Despite the sharp slowdown in economic activity, the unemployment rate continues to fall. The Central Bureau of Statistics today reports that the unemployment rate has fallen for the fourth consecutive month: it has fallen from 6.6% of the labor force in April 2013, in trend figures, to 6.3% in August. Seasonally-adjusted figures show the same trend: the unemployment rate fell from 6.8% in April to 6.1% in August - a 20-year low (under the Central Bureau of Statistics' new methodology).

At the same time, participation in the labor market continues to expand, reaching 64% in August, indicating that the drop in the unemployment rate is not because unemployed people have given up looking for work.

The data should be treated with caution for several reasons, however. First, the seasonally-adjusted data are problematic because of the change in the Central Bureau of Statistics' methodology in early 2012, because in order to neutralize non-economic factors (seasonally adjusted) a sufficiently long timeline is needed to accurately measure seasonal effects. In addition, the labor market lags behind changes in the business cycle, and is usually the last to respond.

Harel Finance analyst Ofer Klein says that the unemployment will rise to annual average of 6.5% of the labor force this year and to an annual average of 6.9% in 2014. He cites three reasons: the steady increase in participation in the labor force following the reduction in welfare payments; the steady drop in exports, due to the weak recovery in the European and US markets; and the expected slowing in private consumption, following the tax hikes that will reduce household's disposable income.

Published by Globes [online], Israel business news - www.globes-online.com - on September 30, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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