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How to analyse unemployment?

Company: Deloitte

Sometimes it may be difficult to orient yourself in the terms and statistics that economists “churn out” regarding the unemployment rate. Let us have a closer look at it.

What can be confusing is the existence of two similar indicators. The unemployment rate is published by the Czech Statistical Office based on the results of the Selective Survey of Labour Force, while the percentage of unemployed people in the population is published by the Ministry of Labour and Social Affairs and the source is information provided by labour offices. Both indicators are based on different data sources and different  methodologies, and as such they are different and may sometimes diverge in time.
Before assessing the situation on the labour market it is suitable to cleanse the data from seasonality. There are a wide range of statistical methods used for this purpose (Tramo/Seats, X-12 Arima). For example, the unemployment rate in the second quarter of this year amounted to 3.0 percent with the seasonal component amounting to (0.1) percent, the seasonally cleansed unemployment rate was therefore 3.1 percent.
Another analysis method is the breakdown into the cyclical and structural components. For this purpose, it is necessary to model the cyclical component depending on the output gap. At present, the cyclical component of the unemployment rate is negative and amounts to (0.5) percent. The structural unemployment rate should therefore amount to 3.6 percent. Part of it is the so-called frictional unemployment. This includes people who are temporarily unemployed as they transfer from one company to another. It is a short-term form of structural unemployment which generally amounts to a few tenths of a percent. The end of the breakdown represents long-term structural unemployment, which reflects the real situation on the labour market and government policy should react to it.
Unemployment is currently not a problem in the Czech economy, as follows from the above breakdown and specific numbers. Structural unemployment amounts approximately to 190,000 people, in absolute terms. There are almost 200,000 available job positions. There is enough work, but a lack of people.

Author: David Marek, Chief Economits, Deloitte

Tags: Finance | Human Resources |

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