Job fair - Vaknin - 1.5.12
Lines at a job fair in Tel Aviv last fall. Photo by Ofer Vaknin
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The unemployment rate rose to 6.9% in March, up 0.2% from February, but a Central Bureau of Statistics official said this was due to recent changes in the way unemployment is measured, not because more people were out of work.

Current unemployment figures are based on a new system that Israel instituted to bring the country's economic statistics in line with leading Western countries. It has resulted in a dimmer picture of the country's labor sector, but one that is still bright compared to many other Western countries.

For the entire first quarter of the year, the CBS reported a jobless rate of 6.7%. That compared with a fourth-quarter rate of 5.4% using the old system, a number that was touted at the time as being the lowest level in three decades. According to the new survey, the jobless rate in the last three months of 2011 should have been 6.8%. Officials were quick to say, however, that there has not actually been a spike in joblessness.

"There wasn't a change in the economy. The numbers just reflect better coverage of the labor market," Yoel Finkel, Israel's associate statistician, told Reuters. "There has been a change in the level but not the trend. It's still one of the lowest in the world." The bureau made nearly 40 changes in surveying the labor market, from adding soldiers to including 100 more cities and towns and conducting the survey monthly rather than quarterly.

"These numbers are more comparable to the OECD," Finkel said, referring to the Organization for Economic Cooperation and Development, a grouping of the world's most developed economies, including Israel. There were media reports that the Bank of Israel was taken by surprise by the numbers under the new system, while private economists were also perplexed by the difference in count.

HSBC economist Jonathan Katz said that by adding the military alone, the jobless rate should have gone down since 100% of soldiers are considered employed. "For the past few years, everyone was scratching their heads as to why wages were not going up and why there were no inflation pressures from the labor market because the previous unemployment rates showed Israel at full employment," Katz said. "Now ... there is some slack in the labor force. It now makes more sense - but I don't know what they were measuring before."

The Bank of Israel said that even with the jump in joblessness, the country was doing comparatively well. "The unemployment rates calculated according to the new method worsen Israel's position relative to other countries, but still leave it favorably positioned compared with many other advanced economies," the bank said.

In 2011, the average unemployment rate in OECD countries averaged 7.9% and is projected to fall to 7.4% this year. For Europe, which is struggling under the weight of a widening debt crisis, the numbers are well above 9%.

Previous data has also shown that Israel, with a population of less than 7.9 million, had a smaller than usual labor force with a participation rate of around 58%. Officials have bemoaned the fact that most ultra-Orthodox men and Arab women do not work and are seeking to bring these large groups into the workforce.

Data from the new survey also showed that the labor participation rate of those over 15 years of age was 63% in March, very close to the OECD average. The number of Israeli residents who were employed in the first quarter rose to 3,290,000, which was 10,000 higher than the final quarter of last year. The number of full-time workers - those working at least 35 hours a week - actually declined, however, by 2% compared to the prior quarter.

The administrative region with the highest jobless rate in the first quarter of this year was the northern district at 11.3%. The Haifa district's unemployment rate was 7.7%, slightly higher than the Jerusalem district's 7.6%. Joblessness in the Tel Aviv district was the lowest in the country at 5.1%.

Workforce data is now the product of interviews on an ongoing basis with about 21,500 respondents 15 years of age and older. The survey includes not only permanent residents but also others who are in the country for at least one full year.

Chief statistician defends approach to gauging unemployment

Israel’s chief statistician, Shlomo Yitzhaki, rejected suggestions yesterday that the Central Bureau of Statistics’ old method of measuring unemployment was flawed. “We’ve upgraded Israel’s statistics. I’m proud of that,” he said.

The CBS called the news conference to address questions raised over the disparity in the unemployment data generated by the old and new approaches. The CBS reported an unemployment rate for March of 6.9%, much higher than the average jobless rate of 5.6% last year under the old system. The new method, instituted in January, is an effort to use the same measure of joblessness used in other member countries of the OECD, the Organization for Economic Cooperation and Development, which includes the world’s most developed economies.

Until this year, the workforce survey was carried out quarterly instead of than monthly as is done now, the CBS explained. In addition, the number of those surveyed is now three times as large as it had been and now includes people in the military. Also, survey sampling is now being conducted in 470 localities compared to 370 under the old system.

Yitzhaki said Israel, which joined the OECD in August 2010, was the last of the organization’s 34 member states to make the switch to the new system of monthly unemployment surveys. The changes in the unemployment rate come from a shift in how the workforce is measured, Yitzhaki said. “We hadn’t made a mistake in the past. We switched from a quarterly series [of data] to a monthly series. The new, larger sample meets the criteria of international comparisons. It is a more accurate estimate of unemployment,” he said.

Yitzhaki noted 38 differences between the previous approach and the new system, acknowledging that the differences “will continue to keep us busy in the coming months and years.”