Unemployment stuck at 13-month low
February’s unemployment rate was a preliminary 7.3 percent of the civilian labor force, the same as in January, the Central Bureau of Statistics reported Thursday.
It remains at a 13-month low after gradually declining since last May, when unemployment reached a high of 7.9%.
“The figures are encouraging and show again that the economic plan adopted by the government a year ago is strengthening and helping the economy to emerge out of the global economic crisis in a better way than other developed countries, which are suffering from higher unemployment rates,” Finance Minister Yuval Steinitz said Thursday.
“Nonetheless, we need to continue to take steps to bring down unemployment,” he said. “Recently the government approved a plan to reduce the number of illegal foreign workers, which is expected to increase the availability of low-paid jobs and lower the unemployment rate.”
In a recent interview with The Jerusalem Post, Steinitz said the unemployment rate was about 1% higher than before the crisis began.
“We expect the unemployment rate to come down further and reach its precrisis level at the beginning of 2011, if not by the end of 2010,” he said.
The economy is set to expand by 3.7%, faster than an earlier estimate of 3.5%, and the average unemployment rate is expected to drop to 7%, up from the previous forecast of 7.1%, the Bank of Israel reported Wednesday.
Next year, gross domestic product is expected to increase by 4% and the unemployment rate to fall to 6.7%, the central bank said.
“The economy continued to grow in the first quarter at a fast rate, and we have also seen robust domestic demand, which tends to be labor intensive,” Victor Bahar, an economist at Bank Hapoalim, said in a report Thursday. “The current growth momentum will probably lead to a decline in unemployment to below 7% by year-end.”
GDP grew by 0.7% in 2009, the result of a 1.5% decline in the first half of the year and 3.3% growth in the second half. From a low of 5.9% in the second quarter of 2008, the unemployment rate rose gradually to 7.9% toward the middle of 2009.
In its annual report for 2009, the Bank of Israel said the labor market had responded swiftly to the decline in demand for goods.
“Labor input began to decline in the middle of 2008, largely due to a decline in hours worked per person employed; layoffs were less prominent,” the report said. “This elasticity in labor input made it possible to mitigate the damage to welfare and consumption that layoffs would have caused. Labor productivity leveled off but did not decline as usually happens during a recession.”
Although nominal wages held steady, real wages eroded due to price increases last year.
“The combination of lower real wages and stable productivity lowered unit labor cost during the recession, thereby helping to stabilize corporate earnings – a matter of particular importance during a financial crisis that made credit harder to obtain,” the report said. “In addition, the real-wage erosion stanched a larger increase in unemployment.”
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