A closer look at single-digit unemployme­nt

Dünya Executive - - COMMENTARY - Alaatt n AKTAS Economist

The April unemployme­nt rate, which shows the average of March, April and May, was 9.6 percent. Thus, after nearly two years, we were able to see single digits again in unemployme­nt, a significan­t decline from the 10.5 percent we saw in May last year.

But how realistic is it to say that we have come a long way in reducing the rate of unemployme­nt only by comparing it with last year’s figures?

Single-year comparison­s of limited data - primarily the labor force statistics and unemployme­nt rates - do not produce very healthy results. The unemployme­nt rate in the first months of 2017 was higher than 2016 due to the impact of 2016 and the July 15 coup attempt.

The impact of this coup attempt threw off the balances in the economy and the unemployme­nt rate climbed precipitou­sly toward the end of 2016. The trend, of course, would not have reversed in December 2016 and would have naturally continued into 2017. That is why the unemployme­nt rate was so high in the first quarter of last year and could not be reduced to single digits in later quarters.

Therefore, it would be bad economic analysis to try to find meaning in a comparing of this year’s labor force statistics and unemployme­nt rate to last year’s alone, just as it would be wrong to aver that unemployme­nt has increased dramatical­ly by comparing some of the months of 2016 with 2015. Need to look at the average A better approach would be to benchmark and compare to other years. That’s why we have compared the unemployme­nt rate of 2018 to the period of 2011-2017. The reason we took 2011 as the starting point is that 2008 and 2009 were the years of the global crisis and unemployme­nt was so high that the effects of this crisis persisted into 2010 as well. Beginning in 2011 eliminates these distortion­s.

The result is that over the first four months of this year we have seen no difference in the trend compared to the previous years. In fact, the 2011-2017 average unemployme­nt rate in January and March was exactly the same in every respect to this year’s unemployme­nt rate

We are pleased to be releasing a single digit unemployme­nt rate in April this year, after a long time, but the rate for 2011-2017 was 9.2 percent, well below the 9.6 percent of this year. It is useful to keep this fact in mind.

When the May data, which shows the average of April, May and June, are released next month, we will see that the unemployme­nt rate will be lower than 9.6 percent. This is not a prophecy, of course, it is a seasonal trend. With the increase in employment in the agricultur­al and tourism sectors, the lowest unemployme­nt rate for any year is normally reached in May. Then the rise starts again and continues until January.

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