Jobless rate jumps a point

Unemployment disappointed even the most pessimistic forecasts and grew dramatically in December compared with November, hitting 9.6 percent from 8.6 percent, according to data from the Labor and Social Affairs Ministry.

Cold weather, a typical seasonal dip in employment and welfare benefits set to expire Jan. 1 were the primary culprits behind the uptick in the number of jobless, analysts agree.

There are currently slightly more than 561,000 job seekers in a labor market that continues to worsen, as the number of vacancies shrank 4.7 percent in December. The country had enjoyed better employment rates than most of the Continent until now, but December's development puts it on par with the EU average, at 9.6 percent as of November, and closes in on the eurozone average of 10.1 percent.

The jobless rate had largely stagnated during 2010, compared with a sharper deterioration in 2009 on the heels of the recession. In 2008, the unemployment rate ended the year at 6 percent. In December 2009, it ended at 9.2 percent. Last year's GDP growth of 2.2 percent helped stabilize the rate slightly, according to a report by Komerční banka's chief economist, Jan Vejmělek.

December's seasonal drop in employment is due to ending labor contracts, which typically run the year and end before the holidays, according to Vejmělek.

"Behind this negative seasonal development is both the decrease in jobs with a seasonal character and the end of fixed-term contracts, which usually falls at the end of the calendar year," he said.

A cold snap and snows in December may also have contributed by making certain types of manual labor impossible.

But last year's labor market development had an added twist, as austerity measures meant fewer social benefits for employees who were laid off after the new year. One of the biggest changes meant individuals could not collect social benefits if they were receiving severance payments at the same time from their company.

"That made an incentive for the unemployed to sign up for benefits before the end of 2010 and use the more favorable rules," Vejmělek said.

Austerity measures, both in the Czech Republic and in other EU countries, mean the unemployment rate will continue to grow, he added, and will likely end in 2011 at nearly the same level as 2010's. GDP is expected to grow more slowly than in it did in 2010; analysts and government bodies have all pegged it at less than 2 percent.

"Concerns that sustainable and long-lasting improvements on the labor market haven't materialized are being confirmed," Vejmělek said.

Claire Compton can be reached at
ccompton@praguepost.com