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Tomáš Brabenec | January 11, 2023

Why is the 3.7% unemployment rate positive news? Tomáš Brabenec replies

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According to data from the Labour Office of the Czech Republic, the percentage of unemployed persons has increased slightly. Compared to the November figure of 3.5%, there were 0.2% more in December.  However, according to Tomáš Brabenec, a partner at Grant Thornton, such an unemployment rate is not a cause for concern and exaggerated pessimism. Quite the opposite. “If we take into account the effects of seasonal unemployment, the development of foreign trade with Germany and the immigration wave, we should rather consider such a number a reason to rejoice,” says Brabenec.

“As regards the decline in vacancies on the Czech Labour Office register, from our point of view this phenomenon does not necessarily indicate problems for the macroeconomic situation in the Czech Republic. We assume that this is also due to the impact of changes in foreign trade in the neighbouring Germany, on which our economy is heavily dependent,” explains Tomáš Brabenec.

“It is also important to remember that we are basing our analysis only on data from the Czech Labour Office, which may slightly distort the situation on the labour market. This is in view of the fact that not all vacancies are registered there. Many employers are solving their staffing situation on their own, i.e., without using the resources and applicants registered at the Labour Office,” Brabenec says.

Moreover, seasonal unemployment effects can regularly be observed at the end of the year. This is usually due to ending (or suspended) work in the construction and agricultural sectors. This effect is evidenced by the significant month-on-month increase in the number of unemployed men, who are employed in these areas the most often.

The immigration wave caused by the war in Ukraine may also manifest itself. “We are talking about tens of thousands of people who, even with regard to the language barrier, are taking up lower-skilled positions, which are to a large extent the ones advertised at the employment offices,” Brabenec says.


For the sake of context, it is worth adding the fact that roughly 1% of people are unemployed simply because they do not want to work. “We therefore have very low unemployment, which, together with inflation, puts upward pressure on personnel costs,” Brabenec continues.

From a long-term perspective, another positive effect can be observed, namely a year-on-year change in the structure of the unemployed in terms of the length of time they have been registered at the Labour Office of the Czech Republic. Here, there has been a significant reduction in the proportion of people with more than 12 months of registration to 27.3%, 6.1 pp lower than at the end of 2021.

On the other hand, the higher unemployment rate in selected regions, primarily in Moravian-Silesian and Ústí nad Labem, remains a long-term problem. “The proportion of unemployed people there is consistently above 5%, which is reflected in their long-term unfavourable economic situation. The problem of the low supply of jobs in the aforementioned regions cannot be solved by companies alone without state support,” Tomáš Brabenec concludes.

Author: Petr Paseka