Economic recovery faces challenges as labor demand slows

While the initial drop in job vacancies witnessed at the onset of the war with Hamas has steadied in recent months, the economy is now grappling with a slowdown in worker demand.

Data from the Central Bureau of Statistics indicate a construction industry surge compensating for shortages, but broader implications include potential impacts on wage growth, household consumption, and unemployment rates.

According to a manpower survey data from December, the “broad” unemployment rate – encompassing the unemployed, those temporarily absent for economic reasons, and individuals who have given up their job search and were dismissed in the last two years – decreased from around 10% in November to about 7.5% in December.

Notably, the reduction was primarily attributed to a decline in those temporarily absent for economic reasons, although this remains relatively high compared with prewar times.

Analyzing broader economic indicators, data from the statistics bureau showed a 4.6% increase in overall redemption across various sectors in November, compared with a 13% decline in October. Nevertheless, the redemption level across all economic sectors (excluding diamonds) was still 9.1% lower compared with prewar levels.

The construction sector suffered more, compared to other industries

The construction sector had a significant increase in job vacancies, contrasting with other sectors, such as transportation, storage, and mail services; arts, entertainment, and leisure; education; and support services, which showed a notable decrease in redemption, which was likely influenced by the war’s continued impact.

In the labor market, the rate of job vacancies increased to 3.40% in December, up from 3.31% in November.

This was a noteworthy shift from October, when the rate had dropped to 3.29% amid the challenges posed by the war. The construction sector, in particular, experienced a rise in job vacancies due to restrictions on Arab workers, leading companies to compensate for the shortage by increasing available positions.

Overall, the positive trends in broader economic indicators provide a glimpse of recovery, but uncertainties persist, and challenges such as inflation and geopolitical risks may shape the trajectory of future economic developments.