Unemployment continued to rise in March
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Latest labour market figures: unemployment continued to rise in March on an unadjusted basis. However, job vacancy dynamics were solid. Industrial payrolls actually held solid momentum in February.
Although the jobless rate according to the Bureau of Labor Statistics fell to 4.3% in March from 4.4% in February, I believe this primarily reflects seasonal work. I estimate that, seasonally adjusted, the jobless rate actually rose slightly to 4.2% from February's 4.12%, and is thus well above the 3.7% rate of last March. The number of reachable unemployed rose by 5,000 month-on-month (seasonally adjusted) to 290,000, more than 33,000 above last year's figure. These figures are slightly above the CNB's forecast of 4.1% unemployment in the first three quarters of this year and 4.2% thereafter.
On the other hand, I am seeing still solid vacancy momentum with new and open positions continuing to grow. We'll see in late April (24th) how employment expectations evolve in response to Trump's tariffs after their slight improvement in March.
A modest, albeit slightly stronger, rise in unemployment may pose a downside risk to the expected consumption-driven recovery in the Czech economy. This is especially the case if Trump's tariffs hit exports harder, which would further reduce labour demand.
On the other hand, although industrial wages slowed their February both nominal and real annual growth, our rough seasonal estimate (the CSO does not publish the full time series) actually suggests still solid momentum in average industrial wages. Namely, around 0.5% month-on-month over the last three months, still around 6% year-on-year. However, even so, monthly March industrial wages would have to add to prevent their growth from slowing to 5.6% in Q1-2025.
We estimate that the seasonally adjusted registered unemployment rate will rise to 4.19% in March 2025 from 4.12% a month earlier. According to data from the Bureau of Labor Statistics, the seasonally unadjusted unemployment rate reached 4.3% in March, down 0.1% point from the previous month. Thus, the month-on-month change in the seasonally unadjusted unemployment rate in March reflects its seasonal decline despite a slight cyclical deterioration in unemployment. Thus, the modestly rising share of the unemployed continues to diverge from the sample unemployment rate. For more on the dynamics in historical context, see the CBA Monitor and Charts 1 and 2 below.
Slightly better March employment expectations. Employers, particularly in construction and services and trade, improved their expectations in March, but this was offset by negative consumer sentiment. The overall index thus improved slightly, although it remained below the long-term average. Expectations on the labour market thus do not undermine the thesis that the decline in industrial employment will not jeopardise the recovery scenario mentioned earlier. For more information see. Chart 3.
Still solid March industrial wage growth. Average industrial wage growth slowed to 3.7% yoy in February. This brings the average for the first two months of this year to 4.8%, slowing from last year's average growth of 6.7%. Thus, its real growth has weakened to 2.1% y/y in the first two months from 4.3% in 2024. However, on a seasonally adjusted basis, I still estimate solid growth of around 0.5% m/m, or around 6% y/y in the last three months. However, unless there is stronger growth in March, then average industrial wage growth will slow further, which will limit average wage growth in market sectors (see Chart 4). These accelerated to 8.3% annual growth in the final quarter of 2024 despite softer industrial wage growth (6.6%), thanks to continued strong momentum in services.
Chart 1: The share of unemployed is slowly rising, but momentum with vacancies remains solid
Chart 2: Continuing divergence between registered and sample unemployment rates(i)
Chart 3: Slightly better March employment expectations, especially among employers, but still in negative territory
Chart 4: Industrial wages need to strengthen in March to avoid slowdown
