January Labour Markets

Data: The unemployment ratio jumped to 9.8%, up from 9.1% the previous month, sharply reversing a downward trend which has been more or less uninterrupted now since mid-2010. The urban unemployment ratio rose to 11.5% from 11%.

All of which sounds bad. And – for reasons which need perhaps more explanation that one might think – it is. However, note first that these unemployment ratios are not seasonally adjusted, and it turns out that the MoM rises in the ratio are exactly in line with usual seasonal patterns. So a seasonally adjusted series would show the unemployment ratios unchanged month on month.

The trouble is, such statistical complacency doesn't extend to the fact that the number of people in employment fell by 589,000, or by 2.4% MoM. That's a fall far worse than the 1.6% MoM fall one normally expects in this month – in fact, its a fall 1.42 Sds worse than normal seasonalized trends. The only reason why the unemployment ratios would have remained the same, seasonally adjusted, is because for some reason, the count of the labour force fell by 442,000, or 1.7% MoM – a fall that was 2.3 Sds outside Turkey's normal seasonal patterns. I have no explanation for this sudden and statistically very unusual demographic deviation.

But, as the chart shows, no matter how you finesse the stats, we still have a situation where employment growth has fallen to 4.5% YoY, and where the underlying momentum in the labour market remains negative.

There's a final but important complication/mitigation. If we look at the 589,000 monthly fall in employment, we find that it's almost wholly the work of two sectors: agriculture (down 391,000) and construction (down 172,000). In both cases, some fall in employment is expected seasonally, but in both cases this was worse than usual – is this a combination of slowing credit being exacerbated by poor weather? Meanwhile, much more importantly, there was no sign that manufacturing employment was suffering: for the first time in three months, manufacturing employment very marginally was stronger than usual seasonal patterns. In the end, we may find that the resilience of the manufacturing sector is what matters.