The Czech unemployment rate increased slightly in May, but this does not mean that the labour market is immune to the economic fallout from the pandemic. This slight increase is probably the result of government measures, but once these measures end, we're likely to see an increase in the months ahead.
The Czech unemployment rate in May increased just slightly from 3.4% to 3.6%. There were only around 12 thousand people more unemployed than the previous month, so a relatively negligible increase, even lower than in April. But so far, the limited increase is driven most likely by some government measures like compensation of wages for those impacted by Covid-19.
But this modest increase in unemployment in the last two months should not be interpreted as the labour market being immune to the fallout from the pandemic. Once these measures end, the number of people queueing up for unemployments benefits will surely intensify.
We expect the unemployment rate to gradually increase over the year. Expect close to 5% unemployment towards the end of the year, though it will depend on the pace of recovery in the second half of 2020.
Source: CZSO, ING