Israeli Job Market Showing Signs of Stress After Years of Strong Growth

Israel Employment Service director calls increase in job seekers, fewer vacancies a 'red light', warns not to wait for the crisis to take action

Two men checking in at an employment service office, 2018
Israel Employment Service

After years of growth and record low unemployment, the local job market is starting to show signs of contraction, the Israel Employment Service said in its annual report, released on Sunday.

While the overall percentage of Israelis working or actively seeking employment remained at a record high, and jobless rates at a record low, the number of job seekers and the number of lay-offs rose in the last few months of the year. Meanwhile, the number of job vacancies showed a decline.

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Israel's employment service’s index of labor market trends showed that the ratio of vacancies to jobseekers, which reflects the prospects of landing a job, had fallen to 60% at the end of 2019, down from 64% in early 2018.

“There is good reason to be worried, because we’re seeing a trend toward rising numbers of unemployed that has been under way for a year and a half,” Rami Garor, the service’s director, told TheMarker.

The agency deals with two populations – people seeking jobs and those applying for unemployment benefits. Among the latter, he said, “we’re seeing a moderate but sustained decline, which testifies to increased reintegration into the workforce” for that population, Garor said.

But there are growing numbers of applications for benefits from people previously employed and looking to remain active, Garor added.

“These are not the chronically unemployed. These are people who are claiming benefits because they were laid off or quit. We’re seeing more and more of them in employment bureaus – in January 2018, they were 90,000, and today they are more than 100,000,” he said.

The employment service’s warnings come a week after the Finance Ministry and the Bank of Israel released updated economic forecasts that don’t point to any deterioration in the labor market.

The central bank said the jobless rate among people ages 24-54 would likely average 3.3% in 2019 (the final figures have yet to be published). It predicted no change in the rate either this year or next. The treasury forecasts an unemployment rate for people age 15 and over of 3.8% in 2019 on average and a decline to 3.7% in 2020.

If the treasury does forecast a decline inlabor force participation to 63.4% of the working age population from 63.6%, it also sees wages rising – by 2% after inflation in 2019 and again in 2020. Israel’s workforce, while growing more slowly than in the past, will expand by 1.9% in 2019 and 2020.

“We want people to pay attention to what is happening beneath the surface because everyone is mesmerized by the low unemployment rate,” said Garor. “We must look at the trends and not wait for the crisis. A training program for the unemployed must be undertaken.”

While conceding that most metrics for the labor market remain excellent, he termed the increase in the number of unemployed a “red light.” But, he added: “We have to be ready for the moment when this trend, God forbid, will cause a significant increase in unemployment.”

Employment service figures show that the number of job seekers declined in 2015-17 to 160,000 a month, from 210,000. The decline continued more moderately in 2017-19, before the trend changed direction in 2019 and began rising moderately.

Over the past year, the number of job seekers rose to a monthly average of 161,600, versus 160,7000 in 2018, all of the rise due to job seekers, not to people applying for income support.

The Central Bureau of Statistics reported a a sustained increase in the number of job vacancies from 74,000 in 2015 to 101,000 up through November 2017. The number plateaued before trending lower starting in November 2018. The total for 2019 was 97,000.

The biggest group of job seekers are those aged 55-64, who account for 27.9% of the total. Those in the 35-44 and 45-54 brackets each account for 20%. Among those applying for income support, the oldest cohort accounts for 51% of the total.

Men led the increase in those seeking jobless benefits – from 72,100 in 2018 to 73,500 in 2019. The number of women remained unchanged at 88,000, the employment service said.