Biggest growths of unemployment in ČR over, say analysts

Prague, Feb 8 (CTK) - The biggest growths of unemployment in the Czech economy are already over, analysts have told CTK in a poll.

The number of the unemployed will still rise owing to the recession, but the situation should stabilise gradually. January meant the worst result in history in terms of the number of job seekers per a vacancy, analysts said. There are now 18.2 applicants per a vacancy at employment offices.

Registered unemployment in the Czech Republic grew to 9.8 percent at end-January from 9.2 percent a month earlier, reaching the highest level since January 2005, the Labour and Social Affairs Ministry said today.

"One of the worst years for the Czech labour market is over. Although we expect that the situation will still worsen in the first months of this year, the changes will not be dramatic," Komercni banka analyst Miroslav Frayer said.

The labour market reacts to an unfavourable economic situation when a drop in demand and sales forces Czech producers and employers to cut costs, including costs of personnel.

Besides, winter months are typically unfavourably influenced by seasonal factors when there is a lack of job vacancies of seasonal nature mainly in agriculture and the construction segment.

Klara Valentova, expert on labour law from law office Ambruz & Dark, said many companies do not hire new staff even though they have enough orders.

"They prefer to chose another alternative, such as ordering of overtime work, agency employment and so on. Domestic branches of foreign companies sometimes do not even have another option as they have to respect decisions of parent companies and not to raise staff numbers," Valentova said.

Patria Finance analyst Tomas Vlk said unemployment should change only slightly in the coming months, but will still have a tendency to increase moderately.

"This should begin to change only in the second and third quarters. But considering the growth of the economy below its potential, we do not expect a sharp drop in unemployment even then," Vlk said.

The worst fears about the start of the second wave of layoffs were not confirmed in January, but this does not mean an easing of the problem of unemployment, said UniCredit Bank analyst Pavel Sobisek.

"While companies lay off slightly fewer staff, the creation of new jobs remains rare. Today's data raise the probability that unemployment rate will reach a culmination point just above 10 percent," Sobisek said.

He estimates unemployment will still rise in February and possibly in March, but the jobless rate should then stabilise thanks to the beginning of seasonal work.

Unemployment in the Czech Republic will stabilise later than in the main economic areas (the USA, eurozone and Japan) as the growth in exports lags behind the development in economies that fuel external demand, said Saxo Bank chief strategist Christian Blaabjerg.

Saxo Bank expects unemployment in the Czech Republic to reach 10.1 percent in 2010 and 10.7 percent in 2011, Blaabjerg said.