Israeli Employment Outlook for Rest of 2020 Looks Grim, Hiring Poll Shows

Survey of 400 Israeli businesses shows only 12 percent expected to step up hiring in final quarter

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Empty stores for rent on Ben Yehuda Street in Tel Aviv, July 13, 2020
Empty stores for rent on Ben Yehuda Street in Tel Aviv, July 13, 2020Credit: Eyal Toueg
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Sivan Klingbail

Israel's unemployment rate isn’t likely to significantly improve by the end of the year, according to a quarterly survey conducted by the personnel agency Manpower Israel.

A poll of 400 businesses showed that only 12 percent expected to step up hiring in the fourth quarter starting October 1 over the low levels of the third quarter. Another 14 percent said they expected to reduce hiring and 63 percent expected no change from the third quarter.

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“The third quarter was very hard. We’re starting to see the first shoots of a recovery, but it’s already clear that it is going to be long and slow,” said Michal Dan-Harel, Manpower Israel CEO.

Behind the sluggish hiring is continued pessimism about an economic rebound: More than three quarters of all the executives surveyed said they did not expect their businesses to recover to pre-coronavirus levels before the end of this year.

“Sixteen percent of businesses have been hurt by the coronavirus in such a way that they won’t recover at all or their recovery will be only partial – they won’t return to their pre-coronavirus level of activity,” said Dan-Harel.

The government has lowered its expectations for jobs returning in the face of a more persistent coronavirus crisis. For instance, in its latest forecast issued two weeks ago, the Bank of Israel said the jobless rate would stand at 11.6 percent in the final quarter of the year in its “optimistic” scenario, and 13.6 percent in its “pessimistic” scenario. The pessimistic scenario sees unemployment remaining at an elevated 12.1 percent in the final quarter of 2021.

Since the second wave of COVID-19 emerged at the start of June, the government has struggled to bring down the number of new cases and is now weighing a general lockdown for the Rosh Hashanah holiday and on Sunday imposed a night-time curfew on 40 of the most severely affected cities.

The Manpower survey also raises difficult questions about the government’s policies for encouraging employees to re-hire furloughed and fired employees. Some 45 percent of the employers that were surveyed said they had received no financial assistance from the state. Only one in four employers said they planned to restore payroll to pre-coronavirus levels.

“The assistance wasn’t effective because it didn’t reach all employers and among those that did get it, only 50 percent have retained all their staff,” said Dan-Harel.

She said that from conversations she had with employers, the main problem they face is uncertainty, which is preventing them from planning. When asked how they envisioned their future workforce, for instance, the great majority answered, “Don’t know.” When she asked one employer what his forecast was, he broke out in laughter and said, “At this point, I can’t even plan for what will be next month.”

Overall, net new employment – the number of businesses planning to step up hiring minus these that are cutting it – is expected to fall two percent in the fourth quarter, an improvement over the decline of seven percent in the third quarter but much worse than a year ago, when it grew five percent, according to Manpower.

The Manpower Israel survey is part of a worldwide poll by the international personnel agency every quarter. The latest survey, which encompassed 38,000 employers in 43 countries, found that in 22 of the countries, the mood was more optimistic than in Israel and that employers expected to step up hiring by the end of the year. In 16 of the countries, expectations were for a decline and the rest expected no change.

“Only five percent of employers worldwide don’t expect to return to previous employment levels, compared with 16 percent in Israel, which shows that the damage to employment in Israel was worse. That’s connected with [government] aid, which in Israel has been relatively low,” said Dan-Harel.

The industry in Israel where hiring is forecast by Manpower to be the strongest is construction, which could see an increase of 18 percent. But few Israelis are likely to benefit from the hiring because the government recently authorized allowing tens of thousands of foreign building workers. Contractors argue that Israelis refuse to work in the building trades.

Retail and commerce is expected to show a small one percent gain and financial services no change at all in the fourth quarter versus the third. In restaurants and hotels, hiring is forecast to fall 26 percent.

“The lack of certainty has created a situation where restaurant and hotel owners find it very difficult to plan ahead and how they will function going forward, especially because they worry that the winter will bring an end to a lot of the business they have enjoyed during the summer even if the face of coronavirus restrictions,” said Dan-Harel.

But even employers in industry and natural-resource extraction also expect a drop in hiring, of about six percent in the fourth quarter from the third.

Israel’s biggest employers – those with payrolls of 250 workers or more – are the least likely to be hiring in the fourth quarter, the Manpower poll found. On average, net new employment at big companies will be down eight percent while small employers expect reductions between two percent and seven percent. Medium-size businesses are the only ones expecting a net increase, of eight percent.

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