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Russia’s Mysterious, Unemployment-Light Recession

The reason might lie outside the official labor-market statistics, Capital Economics says
Door panels sit in a rack before fitting to Lada Vesta automobiles on the assembly line at the Izhevsk Automobile Plant, operated by AvtoVAZ OAO, in Ishevsk, Russia, on Thursday, April 14, 2016. AvtoVAZ's Lada is Russia's largest car brand and best-selling nameplate.
Andrey Rudakov/Bloomberg

Policy makers in the U.S. and Europe have in the past been vexed by the presence of a “jobless recovery.” Russia is now experiencing something less annoying, but no less puzzling: a recession without unemployment.

Despite an economic contraction since the start of 2015, unemployment has now dropped for three straight months to near the lowest in a year. One reason the labor market hasn’t budged is that businesses have been hoarding workers, deflecting pressure with salary reductions, part-time hours and unpaid vacations.