Israeli Unemployment Rate Fell to 20-year Low in August

Encouraging figure is likely to begin reversing next year, as the economy slows amid a difficult world economy and the continued appreciation of the shekel.

Israel's unemployment rate declined to its lowest rate in 20 years in August, with just 6.1% of the civilian adult labor force out of a job, the Central Bureau of Statistics reported on Monday.

While the figures were encouraging, economists said the trend was likely to reverse, with joblessness rising in the next several months.

August marked the third straight month of declining unemployment for people aged 15 and older, from a rate of 6.8% in April and May. It dropped to 6.7% in June and to 6.2% in July, according to CBS figures.

In addition, the CBS said the labor force participation rate – the proportion of the working age population in a job – rose to 64% in August from 63.9% in July.

"The decline in unemployment and the rise in the labor force participation rate in August was a positive surprise. They extend the improvement we saw for the two figures in July and the positive data for the first half the year," said Michael Israel, chief economist at the Finance Ministry. "The employment picture, both from a historic perspective and by international comparison, is good and encouraging."

Nevertheless, he said, the trend is likely to change in 2014 as the economy slows amid a difficult world economy and the continued appreciation of the shekel.

Ofer Klein, chief economist at Harel Insurance & Finance, said the economy is close to the technical definition of full employment, meaning it has not become a source for stoking inflation. He said the jobless rate would average 6.5% this year, before rising to 6.9% in 2014.

The labor force participation rate, however, is likely to continue climbing, as the government cuts back child allowances in the 2013-14 budget, driving more people into the labor market.

The August jobless data was more favorable to women than men. The jobless rate among women dropped a sharp 0.2 percentage point to 5.8% while for men it rose 0.1 point to 6.4%. The labor force participation rate for men, however, grew by half a point to 69.8%, while for women it edged 0.1 point lower to 58.5%, the CBS said. For the key age group of people 25 to 64, the rate also dropped 0.1 point to 78.8%.

With declining unemployment, Israel has seen few workers' demonstrations of late.
Olivier Fitoussi