Czech unemployment rises sharply to 7.4 percent

The Czech Republic saw its unemployment rate jump to 7.4 percent in February, a continued rise which surpassed grim forecasts from a month ago by 0.6 percent. Some 429,000 people in the country are now out of work and the number is expected to rise further as the recession deepens.

A little earlier I spoke to the head economist for UniCredit Bank Pavel Sobíšek who summed up the situation:

“It’s logical to see a rise in unemployment as the economy has slowed down significantly. But what was surprising about the latest figure was the pace of the increase. Previously the Czech economy was able to lessen unemployment substantially and the situation lasted from 2004 to mid-2008. Now it seems that we are at the beginning of a greater jobless increase. As is typical for this wave of unemployment, many of those losing jobs are mostly unskilled workers. On top of that, there are 250 thousand guest workers in the Czech Republic, also losing work. Paradoxically, this may help some Czechs on the labour market. But the situation is difficult and likely to remain so in the months to come.”

What factors have been the most negative, leading firms to slash jobs?

“Well, the structure of the Czech economy is not favourable given the global slump in industrial production. The Czech economy is oriented towards manufacturing and value added in manufacturing is actually the highest in proportion to the size of the economy out of all EU countries. So when manufacturing doesn’t do well, the Czech economy and the Czech labour market are disproportionately hit.”

There has also been a huge drop in exports and euro demand…

“Exactly and we are just now beginning to feel the real impact. Obviously it takes a while for companies to adjust to the new situation. Some began losing contracts back in the last quarter of 2008 and now have started to cut jobs. So we will probably see several months more of significant reduction in employment. Reaching an unemployment rate of 8 percent is more or less certain. I personally think we may even hit 9 percent by the end of this year. But we may still hope this won’t materialise.”