Economy 27 January 2022, 9:00am

Hungary labour market unfazed by new pandemic wave, era of labour shortage dawns

Portfolio

Employment remained high in Hungary between October and December last year - and the last month of the year itself was strong - meaning that the fourth wave of the coronavirus pandemic did not stymie employment. The data show that employment on the primary labour market is at a record high, which also means that the country's pre-crisis problem of labour shortages has returned.

The Labour Force Survey of the Central Statistical Office (KSH) counted 4.688 million employed persons in Hungary between October and December 2021. The number of employed persons has been above the pre-pandemic level for months, which attests that the labour market has recovered. The situation has not been affected even by the fourth wave of the coronavirus epidemic, as it did not have the same restrictions as the previous waves.

According to the data excluding Hungarians temporarily working abroad and those employed in public works (meaning the primary labour market), the number of employed persons persistently remains above 4.5 million. As the graph above shows, the number of employed persons on the primary labour market is substantially above the pre-pandemic level. This also means that the country's previous problem of labour shortages has returned and is becoming more severe.

And this problem is expected to worsen in the coming period as in parallel with the growth of the economy companies' demand for labour increases while the population declines. The number of people aged 15-74 and 15-64 is falling steadily as fewer young people enter and more older people leave the labour market. The number of 15-64 year olds fell to below 6.2 million by the end of last year.

Meanwhile, the unemployment rate also dropped to a low level. Both three-month and monthly data show a jobless rate of 3.7%, which is not far from full employment. As the graph below shows, unemployment has already come very close to its pre-pandemic level.

We have written about the recent trend in unemployment in more detail here:

Overall, we can say that the Hungarian labour market has become tight and labour shortages will become more severe going forward. The bad news is that more and more companies are complaining that the lack of workers is already limiting their growth. In the coming period, businesses are likely to further lower their hiring criteria and seek to attract foreign workers into the domestic labour market.

Distorting monthly data
According to the KSH, their model estimates the number of employed persons in December at 4.687 million, while the raw figure is 4.706 million. KSH introduced the model calculation six months ago. As a continuation of the raw data series, they now report the model estimate, which in some cases differs substantially from the raw data. According to the stats office: "The KSH increases the accuracy of the monthly estimate by using an improved model. The calculation of the 3-month moving average used as the main indicator is not affected by the methodological improvement. Therefore, the calculated average of the monthly data refined by the model estimation may differ from the 3-month moving average published as the main indicator." It is interesting that KSH refers to the three-monthly data as the main indicator, since both the headline and the first sentence of the release refer to the monthly data, stating that "in December 2021, the average monthly number of employed persons aged 15-74 was 4.687 million." There is no separate time series on the model estimate, by the way, and Portfolio continues to use the 3-month average and the raw monthly number (for which a time series is available) as a guide to maintain consistency.

Cover photo: Getty Images