Turkey’s February (Jan-March 2020 average) unemployment rate showed 1.1 percentage points drop to 13.6% with the non-farm unemployment showing a stronger drop to 15.4%, by 1.5 percentage points.
Turkey’s GDP growth came back roaring in 4Q19 with 6.0% and was even stronger in 1Q20- pre-corona days- perhaps at a tune of 7-7.5%. Thus, the observed drop in the unemployment rate appears in parallel with the return to positive growth, yet the numbers still appear curious.
That is, in February, seasonally adjusted total employment decreased by 495K people on a monthly basis. However, as the decrease in the workforce was much more severe with 562K people per month, the total number of unemployed also decreased by 67K people monthly to 4 million. In fact, in the three months to February, the total (seasonally-adjusted) number of employed people fell by 767K, with a decline of 495K in February alone showing the initial impact of the corona effect.
Thus, the headline seasonally adjusted unemployment rate remained flat at 12.7%, while non-farm unemployment rate dropped by 0.1 points monthly to 14.6%. However, youth unemployment increased by 0.4 points monthly to 23.4% in the same period.
The flat seasonally adjusted unemployment rate at 12.7% has its roots in the dropping labor force participation rate, from 52.6% in November 2019 to 50.7% in this period; a sign that why all the GDP growth has not worked wonders on the sentiment indices.
In February, out of the 495K drop in the employment sector, 218K of the monthly decrease in the agriculture sector, 277K of the people were in nan-farm sectors. If we look at the details of non-agricultural employment; industrial employment decreased by 56K monthly, service employment by 194K monthly, and construction employment by 28K monthly.
Similarly, down in the unadjusted series while the population increase in a year’s time was 1 million people, there was 1.1 million drop in the labor force which appears rather inexplicable. People that fled the labor force are a strong 2.1 million over the course of past 12 months. Thus, the 602K drop in the employment rate manages to pull down the headline unemployment rate down to 13.6% from 14.7% a year ago.
Turkey’s unregistered employment stands high at 30% who stand under no social security coverage and are the most vulnerable given the corona lock downs.
As the February employment data is the average of the January-February-March period and thus has a hint of the initial days of the corona crisis, the surge in the public sector employment as 4 pp to 4.7 million people is eye-catching.
The youth unemployment rate between aged 15-24 years is 24.4% as of February with 1.7 percentage point decrease; yet the recovery seems to be based on the drop in the youth labour force participation rate of 39.1% which is a 4.2 percentage point decrease.
Looking forward, no doubt that the corona related measures will carry the unemployment rate rapidly up. The current 4.2 million unemployed people, which has been on a course of decline thanks to the parallel drop in the labor force, is likely to jump to 6.5-7 million level since the official applications to State Employment Agency for short-term employment allowance as of 27 April is 3.2 million people. That would carry Turkey’s unadjusted unemployment rate up to 21-23% range. The gradual easing of the lockdown measures will only partially reverse the trend as the tourism and the services sectors will continue to being hit by social distancing.