The latest Hungarian unemployment statistics from the Hungarian Central Statistical Office (HCSO) offer a glimmer of hope for the labour market. The March 2024 model estimate indicates an improvement in the unemployment rate, which now stands at 4.4%. Meanwhile, the official three-month moving average survey rate has also edged down by 0.1ppt to 4.6% in the January–March period. However, it's still too early to declare a trend reversal. In our view, to confirm a genuine turnaround, we need to see similar positive changes for at least three consecutive months.
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The number of unemployed individuals also shows improvement according to both statistics, hovering at around 220,000-230,000. Interestingly, while the unemployment rate for men has risen significantly, women have experienced a substantial improvement, offsetting this increase. This is the primary driver behind the overall improvement in the official unemployment rate for the first quarter of this year.
A closer look at the data reveals that the number of economically active individuals has started to rise again, not only according to the monthly model estimates but also based on the three-month averages (although the improvement in the latter is minimal). This can be considered an encouraging sign, potentially foreshadowing a slow but sustained positive trend. The reasons behind this rise in the activity rate are still speculative. However, gender-disaggregated data suggests that women are returning to the workforce, possibly driven by the need to maintain a dual-income household in the face of rising living costs.
It's important to remember that while the inflation rate is slowing, this doesn't signify falling prices. And although wages are rising dynamically across the national economy, this is primarily driven by salary adjustments in the education sector. Meanwhile, the pace of wage growth in the private sector is slowing significantly. It's crucial to note that the changes observed in the latest labour market data are, in several cases, within the statistical margin of error. Therefore, it's prudent to wait for the data from the next two months to confirm whether the slight improvement in activity and employment is sustainable or merely a temporary, isolated change.
Despite the current improvement, experts still consider this to be only temporary, and anticipate a further slow erosion in the labour market during the coming months.
However, as we have seen, the labour market typically lags behind changes in the real economy by a considerable margin. Therefore, the expected improved economic performance in the first half of this year is likely to only be reflected in companies' labour market decisions in the second half. Consequently, experts anticipate a slight deterioration in unemployment data until mid-year, followed by a more significant improvement in the second half. Overall, the unemployment rate for the year could hover at around 4.5%.
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