As employment rates rise, Israeli economists issue a note of cautious optimism
Latest figures show August employment rate highest in the country in four years, but fears of a global recession remain
Israel has reached its highest employment rate in four years, demonstrating that the country has fully emerged from the economic crisis caused by the COVID-19 pandemic, Israeli economists have said.
However, they also issued a note of caution in the face of rising inflation rates around the world and the ongoing war in Ukraine.
A labor force survey released Monday by Israel’s Central Bureau of Statistics (CBS) showed that employment rates for Israelis aged 15 and older fell from 60.9% in July to 61 .6% in August. The employment rate indicates the percentage of employed persons in relation to the total population.
When the August data is seasonally adjusted, the report says, the employment rate for August stands at 61.5% (compared to 61.1% in July). The figure also marks an increase in employment rates since the COVID-19 pandemic, during which employment fell to 57.7%.
The latest employment rate represents Israel’s highest in four years, when the seasonally adjusted number was 61.6% in August 2018.
In Israel, many people do not want to work
At the same time, the unemployment rate also increased, from 3.7% in July to 4.1% last month. The CBS defines the unemployed as people actively seeking work who are not already employed.
Israeli economists seemed divided on the overall significance of the numbers.
Professor Dan Ben-David, president of the Shoresh Institute for Socio-Economic Research in Jerusalem and an economist in the Department of Public Policy at Tel Aviv University, told The Media Line that in general, rates unemployment rates in Israel are low compared to last year’s average, which stood at around 5%.
“We’re doing well unemployment-wise,” Ben-David said. “The problem is that when you dig a little deeper, things aren’t quite what they appear. If you look at the maximum working age, which is 35 to 54, the most recent comparative data vis-à-vis the Organization for Economic Co-operation and Development (OECD) […] then labor market participation in Israel is low. The unemployment rate looks at something very partial: who does not work among those who want to work.
The OECD average unemployment rate stood at 5% in May, while the labor force participation rate for the working-age population (defined as 15-64) reached 72.9% in the first quarter of 2022. In contrast, the Israeli workforce participation rate in the force stood at 64.2% in August.
“In Israel, a lot of people don’t want to work,” Ben-David said. “We are doing better compared to pre-COVID and our improvement is better than the OECD countries, but again this has to be taken with a grain of salt because it is mainly due to high technology [sector]. Israel is much more dependent on high technology than anyone else.
Israel’s relatively lower labor force participation rate, he said, is due to the fact that large segments of the population lack the skills or education to enter the workforce. the work market. These include members of the ultra-Orthodox and Arab sectors, as well as populations living in the social and geographic peripheries of Israel.
“Half the children in Israel today are getting a Third World education,” Ben-David said.
Dr. Gilead Fortuna, who heads the Center for Industrial Excellence at Israel’s Samuel Neaman Institute for National Research, told The Media Line that the CBS investigation shows that Israel is fully out of the economic crisis caused by the pandemic.
“In terms of employment and unemployment [rates], we are in the same place we were before the pandemic,” Fortuna said. “But a lot of people still haven’t returned to work.”
Israel’s inflation rate also seemed to be heading in the right direction, falling to an annual rate of 4.6% in August. The same cannot be said for other OECD countries, where the latest data showed year-on-year inflation totaling 10.2% in July. As central banks around the world raise interest rates in a bid to rein in runaway inflation, the World Bank warned last week of the risk of a global recession in 2023.
Nevertheless, Fortuna remains optimistic.
“The Ukraine crisis has also disrupted the markets, but Israel is still in a good situation,” he said. “But if there is an escalation in Taiwan or any other part of the world, it would definitely hurt the global economy.”
Others said the economic forecast remains highly uncertain at this time.
“We are definitely coming out of the recession of 2020 and it takes time,” Joseph Zeira, professor emeritus of economics at the Hebrew University of Jerusalem, told The Media Line.
While most countries have emerged from the pandemic labor crisis, he notes, there are growing fears of a recession fueled by the ongoing war between Russia and Ukraine.
“Since we are less dependent on Ukraine than other countries, if we have a recession [in Israel] it will happen because the world is also going through one,” Zeira predicted. “So it might affect us, but until the world is in a recession, we won’t feel it.”