Unemployment decreases but not the risks

The headline may appear rather confusing. Indeed, the headline unemployment rate for the March period (covering the average across February, March and April) declined significantly from 11.2 to 10.6 percent compared with the February period.
As the Turkish economy is strongly subject to seasonal variations and as we are currently moving from winter to summer, this decline is not surprising. Remember that in March, the January figures drop off and those for April are counted instead to calculate the average over the new time period.
So we have to focus on the seasonally adjusted figures as well as non-agricultural developments. Note that the seasonally adjusted total unemployment rate decreased from 10.2 percent to 10 percent thanks to a strong increase in farming employment. Indeed, seasonally adjusted agricultural employment made a huge jump in March, increasing by 164,000 jobs. Itand’s hard to say whether this increase in farming employment will continue over the upcoming periods since employment in this sector has been on a downward path since 2013.
Excluding the agriculture sector, the seasonally adjusted unemployment rate decreased slightly from 12.2 percent to 12.1 percent. Nevertheless, this happy event hides an unpleasant reality: Non-farm employment decreased by 40,000 jobs. What is worrying about this decrease is that it concerns the industrial and service sectors. Industrial employment decreased by 43,000 jobs and services by 54,000 jobs. It is worth noting that such a decrease has not been seen since 2011. But elsewhere, employment in construction surprisingly increased by 57,000 jobs when it had been in reverse for four months. Finally, the 0.1 percentage point decline in the non-farming unemployment rate despite the decline of non-farming employment is due to a stronger decrease, by 73,000 jobs, in the non-farming labor force. Consequently the number of unemployed people decreased by 33,000 in the March period.
As the monthly fluctuations in the Turkish labor force and employment are quite high, even allowing for the seasonally adjusted figures, one should look at the year-on-year changes in order to scrutinize the fluctuations. Changes in the year-on-year figures over the past four months indicate that increases in the non-farming labor force as well as employment are visibly slowing. Amazing increases in the non-farming labor force and employment had reached their peak from November 2013 to November 2014. During this period, the labor force rose by 1,724,000 (7.8 percent) and employment by 1,131,000 (5.8 percent). These annual increases, totally incompatible with the low gross domestic product (GDP) growth of around 3 percent, then started to decline rapidly. From March 2014 to March 2015, labor force increases were limited to 859,000 (3.7 percent) and employment to 549,000 (2.7 percent).
I have previously noted several times in this column that I expect to see normalization of the unexpectedly high increases in the labor force and employment in relation to the low GDP growth level. It seems now that this expected normalization is under way. So, in the near future it might be expected that the slowdown in employment continues while the labor force increases and would remain more or less at the level required by the structural pursuit of raising the working age population in general, and particularly the strong increase in the female labor force. As long as the low economic growth regime continues, this labor market dynamic would be able to cause an increase in the already high level of unemployment over the coming months.
Public surveys indicate that unemployment is perceived as the main problem for Turkish citizens. I believe this problem will worsen in the future as political uncertainties over the formation of the government continue and risk continuing for months if early elections are unavoidable. Moreover, one cannot be sure that early elections would dampen these uncertainties. It is entirely possible that the outcome of any new general election to be held in four months at the earliest would repeat roughly the same distribution of deputies. For sure, the next government will be facing a serious unemployment problem.

SOURCE: Today’s Zaman