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Israel Unemployment Rate Drops to Lowest Level Since 1985

Aug. 31 (Bloomberg) -- Israel’s unemployment rate declined to 5.5 percent in the second quarter, the lowest level since at least 1985, as the economy expanded.

The jobless rate dropped from a seasonally adjusted 6 percent in the previous quarter, the Jerusalem-based Central Bureau of Statistics said today on its website. Labor participation rose to 57.5 percent, from 57.4 percent in the previous quarter.

“The figures look very good,” said Modi Shafrir, chief economist at Tel Aviv-based I.L.S. Brokers Ltd. “The labor market is likely to remain strong in the third quarter as well. It may weaken a bit after that, depending on the global economy.”

The Israeli economy expanded an annualized 3.3 percent in the second quarter, following growth of 4.7 percent in the previous three months. Growth for the year will likely be similar to the 4.7 percent rate in 2010, Bank of Israel Governor Stanley Fischer said at a conference in Buenos Aires yesterday.

Fischer kept the benchmark interest rate unchanged at 3.25 percent for a third month on Aug. 29 after increasing it 10 times in the past two years. U.S. growth concerns, the sovereign debt crisis in Europe and slowing domestic inflation have spurred speculation that the central bank may soon reverse course and loosen monetary policy.

Interest-rate Swaps

Israel’s two-year interest-rate swaps, a gauge of investor expectations for rates over the period, were at 2.94 percent at 13:40 p.m., the lowest since Aug. 16. The rate has declined from 3.88 percent at the end of July.

The jobless rate is at its lowest since at least 1985, when the unemployment measure currently in use was initiated, the bureau said.

Inflation in July eased to an annual 3.4 percent, its slowest pace this year.

Israel’s benchmark TA-25 stock index has declined about 15 percent since the beginning of the year, led by Discount Investment Corp., a holding company with interests in telecommunications, retailing and manufacturing.

To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net.

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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