Despite the projected nominal increase, a slowdown in the unemployment growth-rate is expected, as a result of slower-than-estimated economic contraction. Specifically, the Troika estimates the overall economy to contract by 4.8% in 2014, and the employment rate to shrink by 4.4%. Signs for better performance in 2014 are also predicted, resulting from improved confidence sentiment and lower uncertainty in the financial sector. Though projected by the Troika at 16.7%, average unemployment in 2013 was measured at 16% of the total labour force.

During the third quarter of 2013, employment decelerated by a rate smaller than 6%, with signs for an even lower reduction in following quarters driven by lower than expected recession, lower labour supply reduction and further downward wage adjustment. According to the ministry statistics, almost four in ten unemployed have been without a job for more than a year, thus falling in the category of long-term unemployed, which is associated with the loss of skills and contact with the labour market, as well as damaging self-esteem and confidence.

Total long-term unemployment, at 3.9% in the third quarter of 2012, rose to 6.4% – or roughly 26,000 people – in the same quarter the following year. Youth unemployment – the 15 to 24 age bracket –increased to 38.8% in 2013, whereas long-term unemployment in the 25 to 34 age bracket totals 35% among the long-term unemployed. Sectors most severely hit by rising unemployment were construction, manufacturing, tourism, banking and the public sector. However, tourism and the financial sector sustained milder downward wage adjustments as a result of stronger unionisation. Nonetheless, overall compensation fell by an average of 5.2% in 2013.

Some factors that may enhance job creation in 2014 have been identified, including private sector innovation and further downward wage adjustments that may attract business investment. Government policies to combat unemployment include re-employment schemes tailored to the most severely hit categories, training programmes to address the risk of skills loss, subsidising recruitment, and encouraging job mobility.

Source: Cyprus Mail