Uemployment declines sharply

ISRAEL - In Brief 20 Mar 2023 by Jonathan Katz

Unemployment declined in February to 3.9% from 4.3% in January (sa) with the employment ratio up to 61.4% from 61.2% (employed/working age population). The number of employed continued to increase  fairly rapidly in February. This positive labor print strengthens our conviction that the likelihood of a 0.5% rate hike on April 3rd is high, in light of sticky inflation and a weakening shekel. The big question will be the degree of impact of the expected slowing of monetary tightening globally, especially by the Fed. Residential starts declined by 12% q/q in Q422 to an annual rate of 59k units compared to 67k for all of 2022. Residential completions increased by 12% q/q to 57.1k, which is encouraging and supports some slowing of rental prices in the future which are measured in the CPI. Nevertheless, we note that in all of 2022 completions reached only 51.9k while the annual increase of households is estimated to be in the 60-65k range, especially in light of the surge of new immigrants from Russia/Ukraine. Housing rental prices are likely to continue to accelerate in coming months before decelerating in 2H23. We expect housing rental prices to increase by 3.5% NTM, slowing from their current 6.8% y/y pace (in our 3.1% inflation forecast).

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