Unemployment, the No. 1 challenge for 2010

10% - psychological barrier

Unemployment rate is expected to hit a record high in the first half of 2010, but most likely it will remain below the psychological barrier of 10%, as there will be unrestructured sectors where the reintegration will be difficult, said the economist of World Bank, Catalin Pauna (photo).

“We haven’t seen the worst in unemployment yet, jobless rate will probably peak in 2010, in first or second quarter. Companies will proceed with caution when it comes time to staff up. Job loss weren’t as high as initially predicted. I don’t think we will see a 10% rate, but it is only a personal opinion”, said Pauna.

The state secretary at the Ministry of Labor, Mihai Seitan said recently the unemployment rate would break through the psychological barrier of 10% in the first half of next year, when the number of jobs lost could reach one million, numbers include Romanian workers expected to return in the country.

“Q1-Q3 had seen a 100% increase in the number of jobs lost, while IMF forecasts indicate 10% unemployment rate in the first half of next year. We’re talking about one million Romanians unemployed, and the numbers include Romanian workers expected to return in the country”, said Mihai Seitan (photo down).

Unemployment rate jumped to 7.1% at the end of October, according the National Labor Agency.

Impact on the young people

According to Catalin Pauna, a certain category of people will find it harder to find a job, such as young graduates and unemployed from unrestructured sectors.

“Unemployment rates among young people was higher even before the downturn, around 20% of them were unable to find a job. Unrestructured sectors will face hardships in the job market, as workers won’t have the necessary skills to seek employment opportunities in other sectors. Furthermore, there is also a high rate in long-term unemployment”, said Pauna.

The economist said the future unemployment will largely depend on how the economy would pick up.

The World Bank’s senior economist for Europe and Central Asia, Kaspar Richter said the EU-10 countries will recover more rapidly from the rest of the EU members.

Economic contraction and unemployment

IMF’s mission chief, Jeffrey Franks said Romania’s jobless rate could peak 10% in the first half of 2010, as Romania is “at the end of the freefall”.

Unemployment is currently at 8% and will continue rising in the first half of 2010. “I wouldn’t be surprised if it peaked 10% before starting to go down”, said Franks.

According to EBRD senior economist, Erik Berglof, the effects of the financial crisis will be visible in unemployment and NPL ratio that will hurt banks’ balances for two years, even though Romania came out of recession, and economic growth returned in the positive territory.

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