Czech unemployment reaches record high

The number of the unemployed in the Czech Republic reached a record high in January. Nearly 590,000 people were out of work last month, which is the highest number since the Great Depression of the 1930s. Compared to December, the unemployment rate jumped by 0.6 percent to 8 percent according to the latest government figures. But the jobless rate would exceed 10 percent if calculated using methodology employed by government statisticians until last year. I discussed the surge in unemployment with economist Daniel Münich from the Prague-based institute CERGE EI.

Photo: Filip Jandourek

“There are two main causes: there was a regular seasonal increase in January because jobs are typically terminated by the end of December so people come to labour offices in January. The second cause is the poor performance of the Czech economy and very sceptical expectations of the business sector and the population overall.”

As you said, the unemployment increases slightly every January but why did it reach a record high this year?

“Well, the Czech economy is not doing well, and all the neighbouring countries including Germany are experiencing difficulties as well. Also, Czech district labour offices underwent a complete makeover last year and it’s possible they still lag being their previous efficiency in helping unemployed people find jobs.”

Daniel Münich, photo: Šárka Ševčíková

The German economy is set for a moderate recovery this year; what impact might this have on the Czech labour market, and how quickly do you think it might be manifested?

“Of course, Germany is the main trading partner of the Czech Republic and whatever happens there economically quickly translates into the Czech labour market. So we hope the German economy will get better and the Czechs will follow soon afterwards.”

What effect will have the arrival of the new season in agriculture and construction?

“The seasons are almost indistinguishable. It depends a little on the average temperature during winter which affects how long construction sites operate at the end of the year and how early they re-open in the spring. So it’s hard to predict but it’s a very regular seasonal trend which is not very significant.”

Photo: Mohammed Shaker, Stock.XCHNG

So what is your estimate for 2013? Do you think the unemployment could linger around 10 percent, as calculated using the previous methodology?

“Yes, it seems rather negative at the moment. I think most of the funds spent on unemployment is used directly as social benefits while the amount of money used on some activation and retraining programmes is rather limited and almost exclusively come from EU funds because Czechs don’t spend very much on these policies. So I don’t see a very bright future, at least this year.”