Economy 24 November 2023, 9:11am

More people are working in Hungary, but unemployment is rising

Portfolio

Employment in Hungary rose to a new record high between August and October, according to data published by the Central Statistical Office (KSH) on Friday. However, the number of unemployed also increased.

Despite the economic difficulties, the number of people in employment has increased steadily in recent months. Between August and October, a record 4.745 million people were employed in Hungary. Over a year, the number of people working in the domestic primary labour market has increased by 26,000, while the number of people working abroad has risen by 12,000.

Meanwhile, the number of people in public works fell slightly. Portfolio calculates that excluding Hungarians working abroad temporarily and public workers, 4,570,000 people were employed, also an increase compared to the previous months.

Meanwhile, the number of unemployed is also rising. Between August and October, 211,000 people were unemployed in Hungary, a rate of 4.3%. As can be seen in the graph below, the monthly model estimates of the KSH show a consistently lower unemployment rate (4.1% in October) than the 3-month average.

Of course, it is not a problem if the monthly estimate deviates from the 3-month average in a given month, but it is disturbing that the monthly model estimate is persistently (throughout 2023) below the 3-month average. Portfolio calculates that the raw (non-estimated) data puts the monthly unemployment rate at around 4.5%.

When employment rises, unemployment generally falls. But now it is different because the active population keeps expanding. (According to the International Labour Organization (ILO) definition, the active population includes employed and unemployed persons.) The general explanation is that in the midst of an inflationary crisis, more and more people who were previously inactive are entering the labour market.

The rapid rise is also interesting because previously it seemed that the number of people in the labour force would be slow and difficult to increase, as most of the inactive population comprised people that are difficult to employ and have even lost their chances of finding a job.

It is possible that the influx of foreign workers is also playing a role here, as more and more of them are likely to be employed in the "private households" covered by the office's survey.