Is unemployment 4% or 10% in Hungary?

The unemployment rate in Hungary is officially 4.5% according to the Central Statistical Office’s (KSH) labour survey. The 217,000 unemployed counted in February were 47,000 more than a year earlier, although it could appear that employees paid a relatively low price compared to the negative economic effects of the coronavirus pandemic.

However, the pandemic has not only shaken the economy but it also presented the makers of labour surveys with challenges never seen before. The coronavirus crisis did not creep into Hungary slowly, which could be handled by the methodology used, but rather arrived overnight. As a result, most of the people who have lost their jobs are not included in statistics, either because they have not been looking for a job for at least four weeks or because they could not start a new job immediately, largely owing to the lockdown.

Like many other statistical offices worldwide, the KSH therefore classifies most of the people who have lost their jobs during the pandemic waves as inactive, not as unemployed. However, according to Portfolio’s estimate, counting these people as unemployed would increase the figure to 280,000, which would mean a nearly 6% unemployment rate. We used a simple method: anyone who had lost their job was counted as unemployed.

As a result of the unique characteristics of the pandemic and its unprecedented shock effect, official unemployment is 4.5% in Hungary, a relatively low rate, but looking at the actual economic processes, we get a nearly 6% rate.

Taking those employed in public works into consideration complicates matters further. If we assumed that people employed in public projects would not find a job in the primary labour market, unemployment would be even higher, over 6% on a statistical basis and 7.7% in real-world economics.

Overall, we can say that the official unemployment rate of just above 4% is actually 6% if we use a real-life approach and nearly 8% if we count people employed in public works as not having a market-based job.

Fortunately, we have other sources than the KSH’s labour survey to find out the number of unemployed as the National Employment Service (NFSZ) is also collecting data on job-seekers. The NFSZ database counts job-seekers, using a different approach than the KSH survey. The latter has weak points in methodology and estimates, while the problem with the NFSZ data is that not everyone who lose their job registers, and it is easy to be dropped from the database.

According to NFSZ data, there were more than 300,000 job-seekers in Hungary early this year. While much lower than the 370,000 peak seen last year at the height of the crisis, it is still visibly higher than the KSH’s figure. The ratio of job-seekers is still 6.5%, which is closer to our adjusted KSH figure of 6% than to the official 4.5%.

There were 370,000 registered job-seekers at the height of the crisis last year according to the NFSZ database, or more than 8% of the working-age population. At the time, the official KSH statistics showed between 220,000 and 240,000 unemployed, while our adjusted estimate based on KSH data was 300,000.

Taking a deeper look at the data we find people in the LFS that the office calls 'inactive', for methodological reasons, of course. Unemployment in a wide sense, the so-called labour reserve has been hovering around 440,000 and 470,000 over the last few months. This category comprises unemployed, and inactive people, those that would like to work (the KSH generaly puts people in this bracket that have been sacked recently), and those that are under-employed. It is not exactly fair to label the latter group as unemployed, though, as they do work in part time but aspire for more. They do not have part-time jobs because they want to but because that's the best they found. During the pandemic, it was not uncommon to reclassify people previously working in 8-hour jobs to 2, 4 or 6-hour positions.

As you can see on the chart above, the group of under-employed people is rather small (but it did increase during the crisis), and even if we disregard them, labour reserve, i.e. unemployment in a wider sense was still around 400,000 in early 2021. And if we accept that those employed in public works do not really hold a 'market job', this adjustment will result in close to 500,000 unemployed people, so we can state that

the primary labour market cannot take up half a million people in Hungary, which translates into a U-rate of 10%.

In order to have the full picture, we should also take into consideration on the number of Hungarians that classify themselves as unemployed, but the latest figures of the stats office in this respect are for June 2020. The KSH does conduct this survey almost every month, so it could publish the figures also for early 2021.

The advantage of this data is that the respondents themselves are given the choice to consider themselves employed or unemployed, and this classification does not depend on methodological factors. And this is also a disadvantage of this indicator, because those who are only temporary out of work could also declare themselves unemployed.

Nevertheless, this would be a highly useful indicator in the pandemic, for it would show how many people are affected by the crisis, according to their own perception. If we had this figure we would not have to wait for people losing their job to finally appear in the statistics as unemployed or inactive people or as registered job seekers.

There was a period last spring when there were more than 420,000 self-classified unemployed in Hungary, but even the last available figure (for the summer of 2020) shows 400,000 of them. As you can see on the chart above, self-classified unemployment correlates mostly with NFSZ data, which implies that largely about 300,000 Hungarians could have considered themselves unemployed even at the end of the 'second wave' in the pandemic.

And the 'third wave' (there are views that there's a single wave in the pandemic) must have dealt another blow to employment in Hungary therefore the March and April jobless figures will be particularly interesting to see. The seasonal effect should have led to an improvement on the labour market, while the stalled recovery in February and the surge in new COVID-19 cases and the subsequent lockdown measures likely triggered adverse changes. Any breakthrough on the labour market can be expected only from a permanent lifting of lockdown measures and a diminished cautiousness of businesses and households. And for that we would need to leave these massive waves in the pandemic behind.

Cover photo: Getty Images