The labour market in Hungary remains tight as the year draws to a close, analysts from ING have said, with only marginal changes reported across key metrics.
Hungary’s unemployment rate remained stable at 4.6% for the period of August to October 2024, matching previous expectations, while the model estimate for October also showed little movement, with the unemployment rate standing at 4.5%.
This suggests that the number of unemployed individuals in Hungary stands at somewhere between 220,000 and 225,000, according to ING.
“The detailed data shows that, in October, the number of persons in employment fell minimally and within the margin of error, while at the same time the number of inactive persons fell slightly,” commented ING analysts Peter Virovacz and Kinga Havasi.
“The latter is likely to be due to population decline and retirement. This is supported by the fact that, in addition to the decline in inactivity, all other indicators – i.e., the number of those unemployed, the number of those employed and the number of persons in employment – also fell in comparison with the previous month.”
A modest decrease
Further analysis of the three-month moving average data reveals a modest decrease of 4,500 in employment, driven partly by population decline and a return to inactivity, suggesting that a drop off in seasonal jobs was partly responsible for the decline.
“There is no sign of any serious structural change in the labour market,” the analysts noted. “Against this background, we maintain our view that the labour market is tight, which has a significant impact on wage decisions.”
Despite what the ING analysts described as a “gloomy” business outlook, with some companies facing weak confidence indicators, many firms are holding on to their workforces – around one in five companies reported retaining more staff than needed for their future capacity.
‘Hidden’ unemployment
This hints at a form of “hidden” unemployment, according to the analysts.
“It is precisely because of the tight labour market, rising wages and the increasing time and cost of recruiting that firms tend to ride out the tougher months by holding on to staff,” they commented. “The question is how much buffer companies have if the weakness of the Hungarian economy is prolonged or if the economic situation deteriorates further.”
Looking ahead, ING states that the labour market in Hungary will be influenced by both seasonal and economic factors over the coming months.
“On the one hand, seasonal employment may increase in the remaining winter months, which could contribute to a gradual improvement in the unemployment rate,” they noted. “A pick-up in the construction sector (suggested by improving order books) and continued growth in services sector could help improving the labour market outlook too.
“However, these contrast with the weak performance of industry, where there is increasing talk of a rationalisation of working hours due to a fall in orders, scaling back of planned capacity expansions or even lay-offs.” Read more here.
