Lower unemployment belies dim outlook

As growth prospects for the global economy continue to worsen, with significantly lower 2012 growth forecasts for the eurozone and the United States, domestic households are starting to feel the delayed hit of a worsening crisis expected to roll on into next year.

In the past few months, GDP growth figures have slowed and even stagnated in European countries, which has serious implications for the Czech Republic's export-based economy. Though the country has been somewhat insulated, analysts point to slowing manufacturing orders and warn that the country will be hit with decreased demand for its exports and, in turn, an increase in unemployment and lower spending power.

The unemployment rate raised some hopes when it dropped in September to 8 percent, or 475,111 people, from 8.2 percent in August, according to the Labor and Social Affairs Ministry, but analysts warn that the number of job vacancies is dropping and that employment numbers will likely stagnate or worsen by the end of this year.

The drop in unemployment rate is likely linked to a delay in the impact of the crisis on some domestic companies, and a rush by some older employees to retire early to avoid September's unfavorably-perceived pension changes, as well as an unexplained removal from labor offices' files of more than 30,000 people who had not found jobs.

Whatever the reason, it comes with the bad news that there were 963 fewer job vacancies posted in August as compared with the month before. Companies are cautious about spending and aren't eager to expand, according to a survey from Mercer, an international firm that provides human resources and related financial advice. Of those companies surveyed, 67 percent want to maintain their current employee numbers, while fewer than 25 percent plan to hire more staff.

Only very slight wage growth is expected, according to Mercer, and very few companies are choosing to implement across-the-board raises, opting instead for individual raises.

"The trend, which has strengthened owing to the financial crisis, is individual pay rises, which are increasingly more tied to employees' individual performance," said Mercer consultant Petr Boldis told ČTK.

Those companies that do choose to increase all of their employees' wages are often tying those increases to company performance, the survey said.

The tightening employment and pay situations expected to spill over into next year will likely aggravate personal finance issues and make outstanding debts harder for households to pay. Personal bankruptcies have been steadily increasing, and the number of cases for the January-September period this year was 93 percent more than the same time in 2010, with 8,265 cases, according to the Czech Credit Bureau (CCB). There were 44 more filings for personal bankruptcies in September compared to August.

"The monthly figures are growing; however, their dynamics are gradually decreasing," said Věra Kameníčková, a CCB analyst. "There are several reasons behind the increase of personal bankruptcies. The slowing economy is certainly one of them. Hand in hand with that is the mild wage growth and increasing unemployment. Many people have little knowledge about the debt financial products they use."

Of the recorded personal bankruptcies, around one-third were people between the ages of 35 and 44, the average age for households with families, also likely to be some of the hardest hit by state austerity measures. In addition, austerity measures will likely include cuts to some workers' benefits, like meal vouchers, which currently account for the majority of extra bonus benefits awarded by companies, according to Mercer.

Bankruptcies among businesses have also been on the rise. There were 230 new bankrupt businesses in September, 131 of which were businesses made up of an individual, and 99 corporate bankruptcies, the CCB said.

Cat Contiguglia can be reached at
ccontiguglia@praguepost.com