Analysis |

Unemployment, Coupled With Leaders Looking Out for Themselves, Could Lead Israel to Mass Social Unrest

It’s clear that the labor market is in a delicate, critical situation that needs significant action in order to recuperate, so temporary unemployment doesn't become permanent

Sami Peretz
Sami Peretz
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Israelis hold signs depicting Netanyahu at a 'black flag' protest in Tel Aviv, April 25, 2020.
Israelis hold signs depicting Netanyahu at a 'black flag' protest in Tel Aviv, April 25, 2020.Credit: Tomer Appelbaum
Sami Peretz
Sami Peretz

What’s Israel’s unemployment rate? The Central Bureau of Statistics stated 4.2% on Monday. By that count, life in Israel is just peachy: There’s nearly no unemployment and everything is going well, as if the coronavirus never happened. But even if you look to other sources, you’ll have a hard time figuring out the actual unemployment rate.

During the coronavirus shutdown, the Employment Bureau published daily unemployment figures that reached as high as 27%, but at a certain point, when it emerged that it had no idea what the actual unemployment rate was, it stopped publishing figures.

As opposed to times when people who lose their jobs or are put on unpaid leave quickly sign up at the Employment Bureau, currently things are entirely different: Not everyone tells the employment bureau when they return to work, and even when it happens it’s not immediate. The result is complete opacity surrounding the unemployment rate. At the very least, the Employment Bureau can say how many people reported going back to work, while new people show up reporting they’re unemployed. Thus, the partial reporting creates a partial picture of movement within Israel’s workforce.

This is what the Employment Bureau reports look like: Between 4 P.M. on Thursday and 4 P.M. on Sunday, the bureau received 3,621 reports of people returning to work. Meanwhile another 1,751 people registered as newly unemployed. It also has a cumulative report starting April 19, the day Israel’s government started relaxing restrictions placed to control the virus’ spread, which states that 350,850 people have reported returning to work, while 123,447 new unemployment requests were filed. In other words, for every three people who returned to work after the economy began to reopen, one person was laid off. And this is even though most everything is open.

Looking at the official figures on their own, the situation is very worrying. The number of officially unemployed peaked at 1,141,968 − 27.4% of all workers. There are still 900,000 people looking for work. If we take out a presumed 100,000 to 200,000 people who returned to work but didn’t report it, we still have unemployment of 20%.

The return to single-digit unemployment seems like it will be much slower than the skyrocketing pace of double-digit unemployment when the crisis began. Even the Bank of Israel, which generally is very on top of statistics, is struggling to calculate the actual unemployment level. Deputy Central Bank Governor Andrew Abir presented a list of statistics concerning the labor market last week, including the percentage of people working and working from home, and the percentage of workers fired and on unpaid leave.

Based on the statistics bureau publication on Monday, the unemployment rate is 4.2%, but since that figure isn’t telling the real story, the bureau reports that another 797,000 people are temporarily not going to work. How many of them will return one day? The statistics bureau doesn’t have the answer, and this is the source of the weakness in current unemployment data.

The lack of clarity is an indication of how unusual this crisis is, and that the country is far from business as usual. The prime minister and central bank are grasping at figures such as credit card purchases, a sum recovering quickly, but from here to the labor market functioning properly is quite the distance.

Chain reaction

There are several factors slowing the recovery of the labor market and business in general, primarily the education system, which has not fully returned to normal operation ; train service, which was restored only on Monday; and the fact that many of the unemployed are putting off purchases.

And of course, hospitality, entertainment, events and performances are only beginning to restart now, without any indication of what demand will be. All of this means businesses are not going back to pre-crisis employment levels. The damage many businesses incurred from the crisis − even strong businesses like insurance companies − is making them hesitant to take back workers on leave, and even lay off people to offset the loss of revenue.

The Herods hotel in Tel Aviv. Israel's tourism industry has been among the hardest hit by the coronavirus.Credit: Ofer Vaknin

This is the Finance Ministry and the Bank of Israel’s main concern − that a temporary lull in demand will cause a chain reaction of decreased economic activity, and become permanent. Thus the Finance Minister has been firing back in every direction, from state-backed loans to grants, sometimes without differentiating between who needs them and who doesn’t, in order to reduce the level of fear.

On the positive side, there are several factors that should raise the confidence of businesses seeking to recover: Millions of Israelis who planned to travel abroad over the summer will now be stuck in Israel and will spend their money here; the understanding that the government does not intend to return to a drastic shutdown and seeks a more calculated balance of risks without paralyzing the economy; and the new equilibrium created between health and financial experts with the formation of the new government.

The bottom line is that the unemployment picture isn’t clear, but it’s clear that the labor market is in a delicate, critical situation that needs significant action in order to recuperate, so that temporary unemployment does not become permanent. The next few weeks will be critical from three perspectives: The effectiveness of the government incentives to improve employment, the diplomatic issues surrounding annexation and the defense implications, for defense and public trust (primarily among the main victims of the financial crisis) in government measures.

Taking to the streets

The last factor is dramatically important, even if it seems at the moment that the public is currently too occupied with licking its wounds to go into the streets en masse. Prime Minister Benjamin Netanyahu and alternative Prime Minister Benny Gantz, who preside over the most inflated government in Israel’s history, are concerned with their own financial wellbeing and stature (vehicle size, home maintenance and the tax benefits that Netanyahu is now seeking to have the Knesset approve for him), and this is creating public unrest that could burst open the longer the economic recovery takes.

To date, the government has handled localized protests among people hurt by the crisis, but these protests could amplify the more people become aware of the gap between the wellbeing of hundreds of thousands of laid off people and tens of thousands of business in crisis, versus self-interest of Netanyahu and Gantz.

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