Positive Trend on the Labour Market

Is unemployment pursuant to ILO also on the decline?

Despite the considerable increase in jobs in the last few months, the Swiss unemployment rate has not really budged – at least according to the jobless statistics of the FSO which are calculated in line with the International Labor Organization (ILO) standards (see G 7). The registered unemployment rate has dropped significantly in the last few months. To a large degree, this is due to a technical conversion of the method used to record the number of registered unemployed. Nevertheless, even if this special effect is excluded, the monthly registered unemployment figures indicate a decline in unemployment. By contrast, the unemployment rate according to the ILO has gone up slightly in the past few months. We believe that this discrepancy will average out over the next few quarters and that the ILO unemployment rate will also decline to some extent. It is however true that the ILO rate has been very persistent in the last few years: Its correlation with the economic trend has been rather low and the rate has remained above 4% even when the economy was doing well. We therefore anticipate no more than a moderate decline in the seasonally adjusted ILO unemployment rate in the coming quarters, projecting a drop from currently 4.9% to approximately 4.5% by late January. For 2019, we expect an average rate of 4.4%. The forecast for registered unemployment in the coming year is relatively low at 2.5%.

Job registration requirement leads to threefold increase in number of registered jobs

The new job registration requirement represents an unknown factor in the calculation of the above unemployment forecasts. Since July 2018, companies advertising jobs in professions with unemployment rates in excess of 8% are required to register their vacancies on the job platform of the Swiss unemployment insurance scheme. On top of this, the jobs must be advertised exclusively on this platform during a waiting period of five days. Companies must consider any jobseekers’ files sent by regional employment offices (RAV) and invite suitable candidates. At the moment, the registration requirement applies to 19 professional categories mainly in the construction industry, hotel and catering, personnel services and agriculture. This will change in 2020 when the threshold will be lowered to an unemployment rate of 5% and the number of advertised jobs subject to the registration requirement will go up substantially.

The next few quarters will show whether the job registration requirement will lead to the desired higher exhaustion of the domestic labour supply and lower unemployment in the respective professions. For the moment, the legislator is encouraged by the fact that many companies appear to comply with the new registration requirement. In July and August, the number of vacancies registered with the regional employment offices almost tripled compared to the preceding months (see G 8). This increase is more substantial than expected. In the absence of empirical evidence relating to job registration requirements or experience values from similar measures in other countries, our forecast ignores any possible effects of the job registration requirement on the unemployment rate. Consequently, the requirement represents a certain forecast risk, especially for the 2020 forecast when the job registration requirement will become more extensive.