Record number of jobs cut in January

Foto: autor

A record number of jobs were lost around the Czech Republic in January, which saw the sharpest one-month rise in the unemployment rate in history. With 6.8 percent of the workforce now jobless, the government is trying to come up with new ideas to boost the economy and bring the decline on the labour market to a halt. However, experts warn the situation is only going to get worse.

January saw tens of thousands of Czechs registering at labour offices around the country, with more than 45,000 jobs lost in the first month of the year. The unemployment rate now stands at 6.8 percent. But what’s more worrying is the record increase in the number of the unemployed – while the Czech Republic has seen more people without jobs, never in its history have so many people lost their jobs so fast. Daniel Munich, a labour market expert at the Prague-based CERGE Institute, explains what happened.

“During the fall of 2008, we observed declining outflow from unemployment – firms simply stopped hiring new people. And in January, companies started laying people off. So this is a new phenomenon, and if you add this low outflow from unemployment to high inflow into unemployment, we get this huge rise in unemployment rate between December and January.”

The Czech Republic’s manufacturing industry, heavily dependent on exports, seems to be affected most. The leading car manufacturer, Škoda Auto, has laid off some 4,000 mostly foreign workers. Thousands of jobs have also been lost in the glassmaking and textile industries, and the largest Czech forestry firm, CE Wood, cut more than 2000 jobs.

The government is looking into a number of ways to increase demand for labour again, such as cutting health and social insurance or even hiring people as sub-contractors and letting them worry about such things themselves.

But any such measures would take time to work through. In the meantime, how bad could things get?

“I’m sure unemployment will rise, and it could easily reach eight or nine percent this year. But it’s really impossible to guess how long the crisis will last because, again, the crisis comes from abroad, it comes from our major exporting countries, and I guess there is nobody who is sure how long it will last in the world.”

With the worst year-on-year unemployment record in five years, Czechs will have to brace themselves for difficult times ahead. Economist Daniel Munich says the country has a good welfare system but apart from that, the future doesn’t look too bright.

“Well it’s good that Czech economy doesn’t have a high debt; the deficit was not zero but fiscally, the country is relatively strong; the country has a viable welfare system so people are not falling to the very bottom once they lose their jobs, they get some money to live on and survive. So there is not much good news in the crisis, I’m trying to see what I could give you but I just don’t see any.”