Israel's Employment Service Warns That Job Market Is Struggling to Recover

The service attributes further deterioration of Israel's labor market to the cumulative effect of successive lockdowns, warns competition for jobs 'will grow more fierce' as extended period of unemployment benefits expires in June 2021

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Israelis protest the unemployment rate in Be'er Sheva in December.
Israelis protest the unemployment rate in Be'er Sheva in December. Credit: Eliyahu Hershkovitz

Israel’s third lockdown had a worse impact on the labor market than the second one, last fall, January figures from the Israeli Employment Service released Monday showed.

Officials attributed the deterioration to the cumulative effect of successive lockdowns and warned that the data showed many Israelis have been out of the labor market for an extended period.

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Fewer people signed up for unemployment benefits in the third lockdown, which began December 27 and began to ease this week, than in the second. However, many of those who registered during the second lockdown did not return to work and were still jobless during the third one.

The agency also noted that for every person who returned to work in January, seven others registered as unemployed. In September, during the second lockdown, that ratio was one to 5.7.

In January, 127,700 people registered for unemployment benefits, an increase of 56.4 percent from December 2020. Only 18,200 reported they had returned to work, the lowest monthly total since the start of the crisis, the employment service said.

A total of 727,400 people were registered with the service at the start of January and 823,600 at the end of the month, Over the course of the month, 762,9000 job seekers reported to employment offices, a 13 percent rise from December.

Of the 127,700 newly registered unemployed, more than 75 percent were on unpaid leave, as against losing their jobs permanently due to layoffs or because they quit. Of the 18,220 who returned to their jobs, 54 percent had been on unpaid leave.

The policy steps taken in Israel over the last year focused on artificially preserving the standard of living by providing extended unemployment benefits. That stands in contrast to the measures taken by most countries in the Organization for Economic Cooperation and Development, which focused on the preservation of jobs, said Gal Zohar, head of research at the Employment Service.

“The result of the measures taken in Israel is that most job seekers are still not feeling any pressure to return to work,” he said. “As we get closer to the end of the extended benefits period, the pressure will grow, which could result in an increase in job seekers pressured to find work and as a result growing underemployment.”

“In such a scenario the advantage of the Israeli policy model could be eroded quickly,” Zohar warned.

Owners of small businesses protest outside a supermarket chain as they're shuttered during Israel's third lockdown, as large chains are permitted to open. Credit: Ofer Vaknin

The ratio of job openings to job seekers confirmed the employment service’s concerns. The Central Bureau of Statistics reported that in January there were 60,300 openings nationwide, down from 101,600 a year earlier. Employment Service officials said that if you measure that against people registered with it, the ratio of job openings to job seekers is about 14 to 2.

Not counting those on unpaid leave who expect to eventually go back to their old jobs, the ratio falls to 6-5. In January 2020, on the eve of the coronavirus crisis, the ratio was 1-7. Although the number of job openings has risen in recent months, the number of job seekers not on unpaid leave has grown more quickly.

“The competition for every job, which seems to be growing, will grow more fierce as the extended period of unemployment benefits expires in June 2021,” the Employment Service said. The government will have to respond by further extending benefits and offering “subsistence” allowances.

To address growing unemployment, the government will have to encourage job creation and invest in job training, said Rami Garor, the head of the Employment Service.

“We have prepared a detailed plan and are taking steps to implement it, such as cooperating with manufacturers in vocational training and assisting employers with workers who refuse to return from unpaid leave,” he said.

Officials said some of these trends were evident before the pandemic, such as a decline in the number of job openings. But at that point, Israel enjoyed full employment.

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