Labor Market Outlook: March 2021


The decrease in the unemployment rate is accompanied by an increase in the composite underutilization rate

Seyfettin Gürsel, Gökçe Uysal, Hamza Mutluay, Mehmet Cem Şahin

On 10th March, 2021, Turkstat made a series of revisions in the Household Labor Force Statistics (HLFS) January 2021. We attempt to summarize the measures taken by the Turkstat and discuss why they are important. We decided to modify our “Labor Market Outlook” research notes to keep up with these revisions,. We suggest that our readers read the first part carefully where the HLFS revisions are summarized.

Based on the monthly employment statistics, both the number of employed and the labor force increased from December 2020 to January 2021 in a parallel manner. As a result, the number of unemployed remained unchanged. Even though the number of unemployed didn’t decrease, the unemployment rate decreased from 12.6 percent to 12.2 percent as a result of the increases in the labor force and the employment exceeding 800 thousand. Note that the level of increases in employment is very close to that occurred between May and June 2020. The quarter-on-quarter GDP increases in the fourth quarter of 2020 may have fueled the increases in employment.

The Turkstat’s new labor force indicators suggest that, the number of the potential labor force (defined as the number of persons not in employment, who express an interest in employment, but for whom the existing conditions limit active job search and/or availability) decreased from December 2020 to January 2021. Contrary to that, another labor underutilization indicator that takes into account the number of time-related underemployed (defined as the number of persons employed who worked less than 40 hours in the reference week, but were willing to work additional hours and were available to do so) noted significant increases.

According to the sectoral data, the manufacturing employment increased by 14 thousand while the construction employment decreased by 9 thousand. The employment in agriculture and in the service sector increased by 366 and 451 thousand, respectively. One would need to analyze the sub-sector data in order to understand the sources of the strong increase in the service sector, when it becomes available. According to the seasonally adjusted data, non-agricultural unemployment declined to 14.2 percent in January 2021, following a decrease of 0.5 percentage points.

The seasonally adjusted data shows that the female labor force participation rate (LFPR) increased from 30.8 percent to 32.0 percent between December 2020 and January 2021. During this period, the male LFPR increased from 66.9 percent to 68.2 percent. While the male unemployment rate went down from 11.9 percent to 11.4 percent, the female unemployment rate increased from 13.9 percent to 14.1 percent. The fact that women are returning to the labor market is an opportunity that should not be wasted. Therefore, measures aiming to eliminate the gender gap in unemployment rates should be taken.

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