Türkiye: May unemployment rate falls to 9.5%

In May, the seasonally adjusted unemployment rate decreased by 1.3 points to 9.5%, while it was 10.8% in the same month of the previous year. When compared to the previous month, it is observed that the adjusted unemployment rate decreased by 0.5 points from 10% revised in April.

· The number of unemployed decreased by 193 thousand compared to April and became 3.33 million.

·  Youth unemployment rate fell to 17% from 18.6% in April.

·  The combined measure of labor underutilisation, the so-called "broad unemployment rate", the underutilized labor force we should be looking at, fell from 23.7% in April to 22.5%.

When we look at the comparable periods, May 2022 – May 2023, it is seen that there is no change in the labor force participation rate between the relevant periods, with adjusted data. The workforce, which was 34 million 602 thousand people in the similar period of 2022, became 35 million 44 thousand people in May 2023. The labor force participation rate remained at 53.6%. Again, looking at the seasonally adjusted data; While the employment rate increased by 0.7 points to 48.5% compared to the same period of the previous year, seasonally adjusted employment increased by 63 thousand people compared to the previous month.

Unemployment Rate in Turkey, %; Participation rate and number of employees… Source: TurkStat, Dinamik Yatırım

Although the decrease in the headline unemployment rate seems a bit of a surprise in this environment, we can highlight two main factors that explain this decrease. The first of these is that the data is for May as it is two months late and there was a lively economic activity before the elections in this period. Therefore, employment did not tend to decrease. The second is related to the labor force participation rate. Although the idle labor force rate has declined to 22.5%, the gap with the headline unemployment rate is high. This reveals the high disparity between those potentially counted in the workforce and those outside the workforce pool for various reasons.

We foresee some factors that will compress the employment market in the coming period. The slowdown in industrial activity is the first reason. The increase in supply costs and the tightening in the credit market, which will increase the cost of financing, will reduce the production activities of the companies. The second is the effect of tightening credit conditions, which we have just mentioned. The use of investment loans will decrease, as the loan supply has withdrawn as of June and commercial finance has become more expensive due to the tight monetary policy. The third is increased personnel costs. Due to these reasons, companies may tend to reduce employment. Therefore, we think that unemployment rates will increase again in the post-June period and it will be difficult to maintain a permanence below the 10% threshold.

Kaynak: Enver Erkan- Dinamik Yatırım

Hibya Haber Ajansı