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06.04.2023 / Erste Group Research

CEE Special Report | Tight labor market is pro-inflationary

We believe that structural factors (demographic changes, low retiremetn age or low participation rate amid aged 65 and over) overweight the cyclical behavior of labor market such as decelerating growth of employment. We thus do not expect unemployment rates to increase. They are at or close to historically low levels in the CEE region and are likely to remain so. Another outcome of tight labor market is increased wage pressure that will keep core inflation elevated and may lead to delayed monetary easing compared to current expectations in our view.

The labor market has not suffered from the economic slowdown so far and the conditions remain quite tight. Unemployment rates (Labor Force Survey reported by Eurostat) went down in 2022 in all CEE countries, despite the looming recession. Job vacancy rates increased while labor market slack declined.

The structural changes on the labor market overweight the cyclical behavior of the labor market, in our view. In consequence the wage pressure remains high and core inflation is elevated. While the headline footprints will decline dynamically due to easing external factors, the underlying demand pressure seems to persist.

The Hungarian central bank is in no rush to begin with interest rate normalization. In Czechia, the central bank said that current market expectations (first rate cut in the third quarter and rate stability until then) are premature. It seems that wage development and the decline of inflation will be decisive regarding the timing of the first rate cut.

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Základní informace

AutorErste Group Research
Název produktuCEE Economies Special Report
Hlavní témaMakro/Úrokové sazby, Směnné kurzy/FX
Zaostřeno na ekonomikuCEE, Česká republika, Chorvatsko, Maďarsko, Polsko, Rumunsko, Slovensko, Slovinsko, Srbsko
Zaměřeno na měnuČeská koruna, Chorvatská kuna, Euro, Maďarský forint, Polský zlotý, Rumunské leu, Srbský dinár
Zaměřeno na sektor-

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