The labor market tightens, supportive of wage pressure

ISRAEL - In Brief 26 Dec 2021 by Jonathan Katz

Economic data released last week point to an increasingly tightening labor market, as the number of employed increased reducing unemployment, while the number of job vacancies continued to rise. The number of employed increased by 92 thousand in November, reducing broad unemployment (including those on furlough due to Covid, and those who left the labor market) to 6.5% from 7% in October (the narrow unemployment rate reached 4.7% in the second half of November). According to calculations from the Bank of Israel, this reduces the potential slack in the labor market to only 58 thousand persons (in order to return to what was regarded as full employment at 2019 participation rates). Meanwhile, job vacancies continued to move higher, reaching 143 thousand in November. This is the first-time job vacancies have surpassed the slack in the labor market. This is supportive of wage pressure and therefore some inflationary pressure as well. Strong growth in Q421, before Omicron. Revenues from the various branches increased 10.8% saar in August-October, following 19% growth in the previous three months. Growth in the past three months was well distributed but more pronounced in the service sectors and real estate. Manufacturing increased by 3.6% saar in August-October (hi-tech sector: 7.2%), somewhat slower than 4.7% growth in the previous three months. The Israeli economy continued to expand nicely in the beginning of Q421, although concerns regarding Omicron most likely led to a modest decline in activity in certain service sectors in December. The shekel weakened last week by 1.1% against the dollar and by 1.2% against the Euro. We note that according to the Israeli Securities ...

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