The growth in employment will be crucial for recovery

ISRAEL - In Brief 03 May 2020 by Jonathan Katz

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Highlights of our upcoming weekly review:Although official unemployment rose only slightly in March to 3.4%, this does not represent the actual state of the labour market.Those on forced non-pay vacation are not considered unemployed.If this segment is included, it is estimated that 817k were out of work in March, or 20% of the labour force.In April, this figure rose to 1.1ml or 27% (source: Employment Agency).It will be crucial to see how quickly this figure declines as the economy opens up, a process which commenced two weeks ago.The number of job vacancies declined sharply in March by 36%.Israeli savings institutions were net FX purchasers in Q120 of 12.1bn USD.Institutions were forced to liquidate their FX hedging as foreign equity valuations declined sharply.The shekel appreciated last week by 0.9% against the USD but weakened by 1.3% against the EUR.Petrol prices declined by 2% in May, our May CPI forecast stands at 0.1%.The MoF issued abroad (Asia) 5bn USD, for 40 years at 3.8% interest.In May, tradeable domestic bond issuance will reach 10.5bn NIS, double the pace of the previous months.The sharp increase is also due to huge redemptions in May.We think that bond issuance will stabilize at 9bn per month in 2H20.Steady BoI bond purchases should prevent higher bond yields. Monetary policy: In an interview last week, BoI Deputy Governor appears less tolerant of further shekel appreciation, and thinks that two forces which previously supported appreciation are less pronounced now: Natural gas exports (due to the sharp decline in natural gas prices) and FDI, with high-tech companies facing difficulties in raising money.. He is keen on bringing inflation back up, espe...