Hungary‘s labour market is presenting a “less optimistic outlook”, analysts at ING have said, as the country’s statistics office reported an unemployment rate of 4.5% for February 2025.
Peter Virovacz, senior economist, and Kinga Havasi, economic research trainee, ING, said in a briefing noted that while current trends indicate a reduction in labour market tightness, securing employment has become increasingly challenging.
Wage growth slowing
In addition, average wage growth is slowing across nearly all sectors, with real wage growth expected to slow “sharply” in 2025, they said.
“The latest labour market statistics from the [Hungarian Central Statistical Office] did not, in principle, provide any major surprises, with the monthly model projection for February 2025 indicating an unemployment rate of 4.5%,” the analysts noted, adding that the three-month moving average unemployment rate now stands at 4.4% for the December-February period.
“Despite the improvement in the participation rate, the number of people entering the labour force has increased the pool of unemployed,” they added, ascribing this phenomenon to two occurances: “On the one hand, the rising inflationary environment is again acting as a stimulus to labour market participation. On the other hand, it also suggests that people returning to the labour market are no longer able to find employment immediately, given the declining number of job vacancies. This is all the more the case as the monthly estimate of employment itself has fallen slightly again.”
Similar patterns
For the second month in row, in other words, Hungary is experiencing pattens similar to those observed during the cost-of-living crisis. The number of available jobs has declined, while labour hoarding, where companies retain employees despite reduced demand, is also evident. The manufacturing sector has begun gradually adjusting its workforce, suggesting the start of a potential downsizing phase.
“We are only at the beginning of this possible wave of downsizing, but the indicator of the potential labour reserve (which includes not only the unemployed but also the underemployed and the inactive who do not meet the official definition of the unemployed but are themselves classified as such) has now started to creep up and now stands at 313,000,” Virovacz and Havasi said. “This also means that labour market tensions appear to be easing somewhat.”
In closing, the analysts suggested that wage trends will depend on corporate wage-setting practices in the coming months.
“With average inflation expected to be 5.4% in 2025, according to our latest estimate, the rate of real wage growth for the year as a whole could be around 2.5%,” they note. “In other words, the big question this year is whether consumer confidence will recover in such a bleak situation and use some or a large part of the household savings available for consumption. Failure to do so is clearly a negative risk for economic growth this year.” Read more here.
