Israel’s broad unemployment rate continued to drop in the second half of March as the economy reopened from a year of coronavirus restrictions, but the number of jobless edged down by just 9,000 in the period to a total of about 484,000, the Central Bureau of Statistics reported Wednesday.
The broad unemployment rate fell to 11.6% in the second half of March from 12% in the first half. Since the second half of February, when the economy began to gradually reopen, the jobless rate has fallen in every two-week period by three percentage points.
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But in the second half of March the rate declined by just 0.4 points, even though the economy was by then at close to full activity, including at restaurants, hotels and places of entertainment, albeit subject to Green Pass limitations.
The slowdown in the drop in unemployment is worrying, suggesting that the economy is struggling to return to pre-pandemic levels after the third lockdown early this year. On the other hand, economists have said the small decline could be due to the fact that many employees who were placed on unpaid leave are refusing to return to the labor market.
That is because the government’s expanded unemployment-benefits program, which covers Israelis on unpaid leave as well as those formally unemployed, doesn’t expire until the end of June. Many appear to have chosen to continue getting aid until then, a phenomenon confirmed by other statistics bureau data showing record job openings last month.
Another factor could be the week-long Passover holiday, which began March 27. Many workers may have chosen to start work after the holiday was over in April, which will only show up in the data for the first two weeks of this month to be published May 3.
A more encouraging development is a narrower unemployment rate comprising the traditional definition of people actively searching for work as well as those temporarily absent from work all week due to reasons related to the coronavirus pandemic. That fell to 8.9% in the second half of March, the lowest since the coronavirus crisis began over a year ago.
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By comparison, the broad rate of 11.6% is still slightly higher than it was in September, after Israel exited its first lockdown.
The drop in the narrower jobless rate has policy implications. Under the terms of the expanded benefits program, once that figure falls below 10% for an entire month, unemployment assistance automatically drops by 10% for those who qualify because they lost their jobs due to the pandemic. The benefits cut will go into effect May 21, a month after the new figure was published.
The average monthly unemployment allowance is 4,500 shekels ($1,375). Cutting benefits by an average of 450 shekels will save the government 200 million shekels a month and, some economists say, create an incentive for many to seek employment before they run out, which may help lower the jobless rate further.
However, Finance Minister Yisrael Katz has said he wants to change the law to allow the full benefit to be paid. His plan has been sharply criticized both by economists and employers, many of whom are struggling to hire workers.
Katz is also at loggerheads with Prof. Avi Simhon, Prime Minister Benjamin Netanyahu’s chief economic adviser, not only over the cut but also over Katz’s proposal to extend benefits past June. In an interview with the Ynet news website Wednesday, Simhon vowed to preserve the automatic cut to benefits.