Fatih Özatay, PhD - [Archive]

Unemployment inertia persists 17/07/2012 - Viewed 1568 times

Unemployment figures have been fiercely inert and steady except extraordinary periods.

Unemployment figures for April were announced yesterday. I prefer not to use seasonally and working day adjusted figures for most macroeconomic indicators mainly in order to investigate whether or not existing trends have been changing. Adjusted data filtered several times may misinform you about the turning points. When it comes to unemployment figures, however, the picture changes. Unemployment figures have been fiercely inert and steady except extraordinary periods as the global crisis. Therefore, seasonally and working day adjusted figures give important intuitions on actual dynamics.

Unemployment rate that jumped to 15 percent (seasonally adjusted) during the crisis era decreased sharply during 2010 and in most of 2011 with a rapid GDP growth performance. Over the last nine months, the rate floated between 9 and 9.4 percent. Ignoring minor fluctuations resulting from the adjustment, we can straightforwardly say that the rate has been highly inert since September 2011. In April, unemployment rate was slightly above the lower limit of the interval, at 9.03 percent.

Let me also touch upon the unfiltered figures for April: Unadjusted unemployment rate was 9.0 percent, labor force participation rate was 49.6 percent and employment rate was 45.2 percent. The figures for April 2011 were 9.9 percent, 49.9 percent and 44.9 percent respectively. The 0.9-point year-on-year drop in unemployment rate in March stemmed partly from the decrease in the labor force participation rate and partly from the pickup of the employment rate.

Slow growth is over

What does this load of figures tell us concerning the answer of questions I have been asking for some time now? Did the period of slow growth that started in the first quarter of 2011 come to an end for Turkey? Will the economic performance in the second quarter be any different than the first quarter?

With the unemployment figures announced, we now know almost all important data for April. And here are the results: The level of economic activity in April was no different than what it was in the first quarter and we don’t have a clear outlook of indicators for May and June yet. Though figures available for now deliver mixed signals, my main inference is something like this: the process of slow growth ended by May. Evidently, this applies if international conditions do not turn around in the near future. But if the turmoil in Europe intensifies, Turkey’s economy might turn back to slow growth or even contraction. Otherwise, it appears that second quarter growth was not much different than the first concerning growth performance and that it might outperform the first only slightly.

This commentary was published in Radikal daily on 17.07.2012