Israel’s June labor market update: broad unemployment jumps, but labor market remains tight

ISRAEL - In Brief 22 Jul 2025 by Sani Ziv

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According to preliminary figures released yesterday by the Central Bureau of Statistics, the broad unemployment rate in Israel surged to 10.0% in June, largely due to the two-week war with Iran. The number of people absent from work due to the war reached 295 thousand while the number of military reservists called up reached 57 thousand compared to just 21 thousand in May. Given that the war lasted only about two weeks, the actual number of workers absent during the two-week war is estimated to have reached nearly 600 thousand at its peak. We see the sharp increase as a technical spike, reflecting the temporary shutdown of economic activity during the war. Interestingly, despite official instructions not to leave home during those two weeks, many workers - actually around 90% - continued working remotely or under the Emergency Economy framework, particularly in sectors that are conducive to remote work. Monetary policy implications From a monetary policy perspective, these labor market figures are unlikely to change the Bank of Israel's policy view in the near term. The minutes of the July 6–7 interest rate decision, also released yesterday, indicate that the decision to leave the policy rate unchanged at 4.5% was unanimous (6–0) and strongly influenced by continued labor market tightness. As the Committee noted: "The labor market remains tight, with a high job vacancy-to-unemployment ratio, despite a slight increase in the unemployment rate." Additionally, "Wage growth in the business sector remains elevated, especially outside the high-tech industries." Bottom line: Despite the temporary rise in broad unemployment, the underlying labor market conditions support holdi...