Czech unemployment edges up but downward trend seen continuing and could translate into lowest jobless rate in Europe

Photo: Jan Langr / Czech Television

The Czech Republic is reckoned to have the second lowest unemployment rate in Europe, only beaten by neighbouring Germany. But the good news over recent months was interrupted on Monday with the latest unemployment figures for December showing a slight upturn in the jobless total. So how is the labour market looking in the Czech Republic.

Photo: Jan Langr / Czech Television
The headline figure from Monday’s figures is that the overall unemployment rate in the Czech Republic has inched higher to 6.2 percent from November’s 5.9 percent. That means around 22,000 more people are looking for work with the jobless total at around 453,000.

The latest figures were no real surprise. Most analysts predicted the upturn as extended seasonal work in construction helped by a mild winter finally came to an end and many self-employed, for example in the tourist industry, rejoined the ranks of the unemployed.

Even in such a fairly small country as the Czech Republic, there are still immense differences in the jobless figures and the chances of finding a new job. The country’s worst jobless blackspot at Bruntál, in the far east of the country near the Polish border, has an 11.6 percent unemployment rate and there are on average just over 18 people for every vacancy. In parts of Prague the jobless rate is near 2.6 percent, a figure approaching what economists regard as near the minimum unemployment level resulting from people switching between jobs.

David Marek,  photo: Šárka Ševčíková
But even the latest statistics bear some encouraging news. Two of the regions with historically high unemployment, Most and Ústí nad Labem, actually reversed the national upward trend and registered a fall in their jobless totals.

And the overall number of vacancies across the country at just over 100,000 is at the highest level since the peak of the previous economic boom in 2008. Employers though are still complaining that they cannot fill skilled posts such as welders, electricians, skilled machine operators, and even truck drivers.

Chief economist of the Czech branch of the consultancy Deloitte, David Marek, described how he sees Czech unemployment going forward.

“Measured by the standard unemployment rate used in other EU countries, currently the unemployment rate is 4.6 percent and by the end of 2016 I guess it can come closer to 4.0 percent and it can even be the lowest figure in the EU.”

Photo: Veronica538,  Wikimedia CC BY-SA 3.0
But Marek warns that employers might have to start hiking wages to get the workers they need in skill shortage sectors. And whereas pay rises in the past were more than covered by productivity increases, a new trend might emerge in the Czech Republic where increased pay is no longer offset by productivity gains.

“There is one problem arising and that is the shortage of a skilled labour force and the outcome might be that wages are likely to increase and wage inflation will accelerate in the coming quarters.”