Fancy figures are only the surface! Hungary in deep trouble in second wave of coronavirus pandemic

• There were 4.5 million people employed in Hungary in December 2020, which was only a tad less than in the same month of 2019, the Central Statistical Office's (KSH) latest data showed.
• In terms of the unemployment rate, we haven't seen staggering problems, either. A total of 198,000 people were without a job in December, only slightly more than in the previous few months. 

Let's forget for a moment about the fact that both the jobless rate and employment grew simultaneously in Hungary in December. This is a statistical 'glitch' in that under the international methodology used by the KSH those getting axed are not classified as such at the time of their sacking, and may not become officially unemployed at all. (To gain unemployed status in statistics you need to meet certain criteria.)

And that's all we learned from the KSH's release last Thursday. Based on these data, the situation on the labour market did not appear to be bad at all, despite the lockdown measures put in place in mid-November. However, the stats office revised a host of other data later on Thursday and these paint a whole different picture of the labour market. 

Let's start with labour reserve that is a good litmus paper if you want to see the real issues on the labour market. This group includes everyone; those that meet the requirements to be statistically considered unemployed and those that cannot tick off all the criteria but would want to work (e.g. they do not actively seek employment for at least a month, either because they cannot or because it is not possible due to the restrictions; or they could not start in a job within two weeks). 

There was a labour reserve of 400,000 people in Hungary at the end of last year, which corresponds to an increase of 100,000 over December 2019. This figure already tells us that the labour market is in a much worse condition than what the headline figures show. In other words, a lot of people lost their job in late 2020 and are still unable to find a new employment. They will possibly lose hope of every finding a job again, and give up looking for one as they cannot find employment in their own profession. This should hardly be a surprise, as it is absolutely impossible to say when tourism, hospitality or other services can return to normal. 

Below you find a chart with labour reserve figures adjusted by Portfolio. The numbers themselves are basically the same but the composition is different. The reason why we have created this chart is because the KSH does not consider everyone who has been fired to be unemployed. If we do classify sacked employees as actually unemployed people, this is what we get. The orange area becomes larger:

It is not only unemployment statistics where we find unfavourable changes; employment data also give reason for concern. Regardless of the high number of employed people, when a lot of them did not actually work. In December, a whopping 16% of employed people did not work. This is more than at the peak of the first wave (12%) and what was recorded at the end of 2019 (11%). Consequently, Hungary might have had 4.5 million employed people at the end of last year, only 700,000 of them did not actually work. 

The number of employees not engaged at work always rises in December, as people go on leave and plants shut down in the holiday season. Seasonal factors also play a role here. This time, however, the percentage of non-workers has jumped higher than usual. 

The odd situation may be rooted in the fact that major restrictions were announced in mid-November in Hungary to curb the spread of coronavirus. Due to the pandemic, virtually the entire services sector, hotels, restaurants, gyms, shut down. The number of businesses temporarily off duty has increased sharply, which coincides with the high number of employees not working in that period. 

In December 2020, the average number of hours worked per employee per week was under 30 hours, which marks a decline of 4.7 hours year on year. This is a lower reading than in the worst days of the first wave in the pandemic. 

Overall, KSH data show that employment was at a high level with 4.5 million people employed in December 2020. Detailed figures, however, reveal that a lot of these employees, 16% of them, did not work. And the number of hours worked per week declined by almost 5 hours in annual terms. Although unemployment did not increase significantly, the detailed statistics indicate a sharp rise in labour reserve that suggests worsening problems in terms of unemployment in Hungary. 

The employment and unemployment data published by the KSH at 9 A.M. on Thursday (28 Jan) pained a favourable picture of the labour market. As they did not reveal that the underlying processes give reason for concern, analysts also acknowledged that the Hungarian economy had adapted to the second wave of the coronavirus pandemic rather well. A few hours later, the KSH released another set of figures from the very same source (labour force survey, LFS), but these have already indicated major problems on the labour market (expanding labour reserve, fewer hours worked, new record in the percentage of employees not engaged at work). We believe the KSH should consider publishing data from the same data source simultaneously, which would save analysts the hassle of trying to puzzle together different processes and immediateley have the full picture on what's going on in the economy or, in this case, the labour market.

Cover photo: Getty Images