Romania’s unemployment close to trend change due to economic slowdown and lack of public investment

The unexpected rise of Romania’s unemployment rate in the last quarter of 2018 could indicate a trend change in the near future, due mainly to the end of a global economic growth cycle, to the economic slowdown and to the lack of public investment, economists say.

National Institute of Statistics (INS) fresh data showed that Romania’s unemployment rate bounced back unexpectedly in Q4 2018 to 4.1 percent, from 3.9 percent in Q3.

Analysts point out that a series of indicators limit the downside potential for Romania’s unemployment rate.

“The slight uptick in the unemployment rate could have been due to an increased number of people joining the labor market (…) after sustained double-digit wage hikes that occurred in the last two years,” ING analysts said last year in a research note.

Official data show that the highest unemployment rate was among the Romanians aged 15-24 years, of 16.3 percent.

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The unemployment rate among men exceeds the rate among women by 1.1 percentage point, with 4.6 percent for men and 3.5 percent for women.

Few available jobs

Experts warn that Romania still has few available jobs compared to its total active population, and this factor limits its growth potential.

“The Romanian labor market offers a pretty complex and slightly puzzling perspective. In the 15-64-year old category, there are roughly 4.9 million employees in an active population of around 8.8 million. By contrast, neighboring Hungary has roughly 4.4 million employees and an active population of 4.6 million,” ING analysts point out.

This approaching trend change comes in a moment when Romania still needs to maintain a high rate of jobs creation in order to keep structural unemployment under control.

Hidden unemployment

Romania still have a large unemployed workforce, hidden in the official statistics under the expression “self-employed in agriculture”, despite claims of a workforce crisis.

However, governments have never imagined effective policies to make these people interested in taking real jobs.

The latest National Institute of Statistics (INS) data, consulted by Business Review, show that Romania has 1.6 million working-age adults – or 19 percent of total employed population – considered as “self-employed in agriculture”.

For most of them, this label is just another word for “jobless”, as they usually live in poor rural areas, with very few job options, and have small plots of arable land usually used just to cultivate their own food.

These individuals are part of a large Romanian population disconnected from economic growth, according to experts.

“Romania’s prosperity is not equally shared, as the bottom 40 is largely disconnected from the drivers of growth. Close to half of the people at the bottom 40 percent of the income distribution do not work, and another 28 percent remain engaged in subsistence agriculture,” World Bank experts said in a recent report called “From Uneven Growth to Inclusive Development: Romania’s Path to Shared Prosperity”.

Unemployment in Romania is highly concentrated in poor rural areas – mainly in Moldova and southern Wallachia -, where the labor force is highly unskilled and where there are few opportunities.