Israel’s jobless rate plummeted in July to its lowest this year as the economy expanded.
The monthly unemployment rate declined to a seasonally adjusted 6.5 percent from a revised 7.1 percent the previous month, the Jerusalem-based Central Bureau of Statistics said today. At the same time, labor participation rose to 63.9 percent from 63.6 percent, it said.
“The labor market is functioning well,” Finance Minister Yuval Steinitz said. “To preserve fast growth and low unemployment and protect the citizens of Israel from the global crisis we will have to be extremely careful to preserve economic and fiscal discipline.”
Economic growth unexpectedly accelerated for the first time in a year and a half in the second quarter, driven by an increase in exports and consumer spending. The economy expanded an annualized 3.2 percent compared with a revised 2.8 percent in the first three months of the year. Bank of Israel Governor Stanley Fischer said the government needs to cut the budget by about 17 billion shekels ($4.2 billion) to help contain the deficit amid the European financial crisis.
The bureau said in its statement that the jobless rate may have been affected by the monthlong Ramadan fast which began in July and by school vacations, which may have lowered the number of jobseekers.
Trend figures published by the bureau, which remove “irregular influences” from the seasonally adjusted data, show a decline in unemployment to 6.7 percent from 6.8 percent in June and 6.9 percent in the four previous months.
“It implies a slight downward trend,” said Daniel Hewitt, an economist at Barclays Plc in London. “That, in conjunction with the second quarter GDP release, implies that the Israeli economy is doing very well.”
The Bank of Israel said in an Aug. 27 statement that it will probably lower its domestic growth forecast of 3.4 percent for next year in September amid the global economic crisis. About 40 percent of gross domestic product is made up of exports.
The figures released today run counter to earlier indicators that showed a worsening in the labor market, said Modi Shafrir, chief economist at Tel Aviv-based I.L.S. Brokers Ltd. These include data released by the government’s employment service, which showed a decline in demand for employees since the beginning of the year and a rise in the number of people fired in July.
The statistics bureau, since the start of the year, has been publishing monthly unemployment data under a new format that changes the labor force survey from quarterly to monthly, to comply with Organization for Economic Cooperation and Development standards.