The labour market has been breaking long-term records. The share of unemployed has been decreasing thanks to favourable seasonal effects from works in the agricultural and hospitality industries. Favourable trends have been expanding on the labour market, but the lack of a labour force might become an impediment to economic growth. The good news is that strong wage growth should persist.
The share of unemployed recorded another drop in May. After it printed 4.4% in April, it dropped to 4.1%. Not only have we seen declining unemployment, but the number of vacancies has been growing rapidly. Their count increased already to 174,000 in May, which is the historic high of the series. The share of unemployed to vacancies thus decreased below 2.0, another long-term record as it surpassed the lows from the peak of the business cycle in 2008. Further good news is that the number of unemployed youths and graduates is also at a record low.
The growth dynamics of Czech industry at the beginning of the year accelerated, which caused a pickup in employment, as well. It increased 1.5% in the first quarter of the year. Today’s data confirm that there is a lack of an available labour force, while figures released yesterday show that it creates strong wage pressures. Renumeration in industry increased 8.1% in April, and that will cut companies’ profits. We believe the shortage of labour will force businesses to investing in automatisation and robotisation. Such investment would support growth of the economy as well as its potential. Czech industry must increase its productivity if it wants to survive. Without investment, the Czech economy cannot assume stronger than 2% growth on the longer-term horizon and it would also lose its competitiveness. Further expansion of the economy will have to do without growth in employment as the share of unemployed has little room for further declines. During 2017, the share of unemployed should reach its low from the last business cycle at 3.8%. We do not think automatisation would induce higher unemployment. In contrast, we think higher productivity would move the economy toward its Western peers and ensure sustainable growth of wages.
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