Czech jobless rate jumps to 9.6 % due to cuts

561,000 unemployed in the Czech Republic

After stagnating without any serious fluctuations in 2010, the Czech unemployment rate shocked in the last month of 2010 by jumping by one percentage point, to 9.6 percent, said the Labor and Social Affairs Ministry.

In addition, the number of vacancies decreased by 4.7 percent.

In December 2010, there were 561,000 unemployed in the Czech Republic, which is 54,911 more compared to November.


Public sector cuts

“Surely, the drop in construction activity due to freezing temperatures and regular seasonal decrease contributed to this development. The unemployment rates jumps up every December,” said Pavel Mertlík, an analyst for Raiffeisenbank.

“However, the main source of the increase is without doubt the government’s policy – the austere budget for 2011 reduces the sum available for public sector salaries. Layoff notices were distributed in advance,” Mertlík added.

According to Mertlík, the cuts in public service sector will continue to negatively influence the unemployment rate in the coming months.

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Other factor that doubtlessly contributed to the hike is the change in unemployment benefits effective since January 1, 2011. Many wanted to register before the end of 2010 in order to receive benefits according to the original rules.

“Firms are afraid of fluctuations in demand and even in case of high capacity utilization they prefer other ways than creating new permanent positions, such as fixed-term contracts. Many of these contract run out by the end of year, which will negatively influence the unemployment rate in January 2011,” said Klára Valentová, an analyst for Ambruz & Dark.

After the hike, the Czech Republic’s unemployment is on the EU average, which was 9.6 percent in November 2010. The euro-zone unemployment rate was 10.1 percent at the time.

Poland, the Czech Republic’s neighbot, registered a similar seasonal jump, and its unemployment in December 2010 jumped to 12.3 percent.


Read more: Czech lawmakers approve 2011 budget with 4.6% deficit

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Read more: Hopping on austerity bandwagon: 2010 in Czech politics

Read more: Lost Generation: Young Czechs hit by unemployment 

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