Long-term labor shortages continued to build up in Q3

HUNGARY - In Brief 29 Oct 2017 by Istvan Racz

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What happened on the domestic labor market in Q3 2017 was nothing revolutionary in itself. However, it contributed to the revolutionary long-term process of shrinking unemployment and growing labor shortages, (not so much) indirectly leading to accelerating wage growth and (eventually) higher inflation or lower growth.Active-Age Population, Employment and Unemployment (in 000s, period averages) Source: KSHIn short, the unemployment rate fell to a long-time (30 years or so) record low of 4.1%, from 4.3% in Q2 and 4.9% in Q3 2016. Taking into account the participants of social employment programs as unemployed, the unemployment rate for Q3 this year would go up to 8.3%, but that adjusted ratio would be even more steeply down from 8.8% in Q2 and 9.9% in Q3 2016.Behind these ratios, the basic fact remains a shrinking active-age (15-65 years) population, down by 69 thousand people in the year to Q3, against which the actual active population still rose by 19 thousand in the same period. But (a) the increase in the active population is slowing down spectacularly (0.4% yoy in Q3); and (b) employment rose much faster, by 57 thousand, and in fact by 92 thousand (2.3% yoy) on an adjusted basis, given that the government reduced the number of participants of SEPs by 35 thousand in one year's time, releasing people back to the labor market.One result of all this is worsening labor shortages. The other day, the CEO of BKV, the public transportation company of Budapest, admitted that they would require 150-200 of additional bus drivers, in addition to the 2100 they have, in order to be able to run the service without resorting to overtime work and payments, getting very close to the...