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The Warsaw Voice » Business » November 19, 2008
ECONOMY
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Global Crisis Will Cause Local Layoffs
November 19, 2008 By Andrzej Ratajczyk   
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The unemployment rate is still on the decline in Poland, but the anticipated slump in the economy is expected to soon have a negative impact on the labor market.

According to data from the Ministry of Labor and Social Policy, the official unemployment rate was 8.8 percent in October, a drop of 0.1 percentage points from September. The number of unemployed in Poland totaled 1,353,200, or 23,400 fewer than at the end of September.

Since the start of this year, the number of people without jobs dropped by 393,400 (22.5 percent). This October saw the lowest unemployment rate since 2005; by comparison, the rate stood at 11.3 percent in October 2007, 14.9 percent for 2006 and 17.3 percent for 2005.

Data from the Labor Ministry shows that many people are removed from unemployment registers because they either have found a job or failed to confirm their willingness to take one. Most job offers came from minor employers, mainly in the services sector. The declining unemployment rate was also due to work subsidies from the Labor Fund and the European Social Fund for training, postgraduate traineeships and grants to start new business operations.

The Eurostat EU statistical office also confirms a decline in the unemployment rate in Poland. Eurostat reports a rate of 6.5 percent in September, compared with 6.7 percent in August and 9 percent in September 2007. The Polish and Eurostat figures differ because Eurostat calculates the unemployment rate as the share of unemployed people (defined as people aged 15-74 who are without jobs, are capable of starting work within two weeks and have actively sought employment in the past several weeks) in the total number of active people in the labor market (either employed or unemployed). The Polish Central Statistical Office (GUS), in turn, defines the unemployment rate as the percentage of unemployed registered at unemployment offices compared with the total active population.

According to Eurostat, Poland's unemployment rate has declined the sharpest of all EU member states, and is below the EU unemployment average. Formerly Poland had the highest jobless rate in the entire EU, peaking at 20.7 percent in February 2003 and 19.6 percent for the entire year. The unemployment rate in the EU was 7 percent in September, compared with 6.9 percent in August and 7 percent in September 2007. In the eurozone, the figure stood at 7.5 percent, the same as the previous month and higher than the 7.3 percent in September 2007. The lowest seasonally adjusted unemployment rate was reported in the Netherlands (2.5 percent) and Denmark (2.9 percent), and the highest in Spain (11.9 percent) and Slovakia (10 percent).

The positive situation in the Polish labor market may soon change, as indicated by recent economic research reports and announcements of company layoffs. In a report published in early November, analysts from the Bureau for Investments and Economic Cycles (BIEC) concluded that economic moods among company managers have been deteriorating for several months. Every month, more pessimists are saying enterprises are finding it increasingly hard to operate. The economic situation appears the most encouraging for service providers, but even they are gradually losing their optimism.

The weaker economic outlook will inevitably result in worse employment prospects. The industry sector, which is quick to respond to changes in the economy, is already planning layoffs in the coming months. Construction companies, for which an insufficient labor force has been a major obstacle to date, are now complaining about excessive labor costs that hinder further employment, according to the BIEC report. On the positive side, the report says some retail enterprises, large ones in particular, are still planning to raise employment somewhat in coming months. Most people will get jobs in the services sector, but the number of new job contracts will likely be lower than in past months.

Experts from BIEC also report a sharp decline in the number of job advertisements in the media. "Just a few months ago, the number of advertisements submitted at job centers oscillated around a stable level, but now it has sharply declined to the lowest value in two years," the report said. "This downward trend is highly likely to continue in the coming months."

The third quarter of 2008 brought the first decline in online job offers in years. Some employers, mostly in the finance and heavy industry sectors, have already stopped hiring new people. Experts say that companies are increasingly reluctant to make hasty decisions on hiring, and are showing more caution. This is confirmed in the latest data from Pracuj.pl, one of the largest job search websites. For the first time in three years, the number of job advertisements placed with Pracuj.pl in one month, 54,900, was lower than in any of the three previous months, when it reached over 57,000.

The first companies to be affected by the slowdown in the global economy will be exporters. Fewer orders from abroad lead to reductions in both production and employment. The Puls Biznesu economic daily estimates that in the near future, nearly 7,500 people will lose jobs at large enterprises in Poland. Stock-listed companies alone have announced layoffs totaling to over 5,500 people. According to Puls Biznesu, the largest layoffs are in the glass-making trade, most notably Kro¶nieńskie Huty Szkła (Krosno Glassworks), which will dismiss 1,200 employees. The Irena glassworks has announced plans to lay off nearly 350 people. The situation is equally bad in the chemical and metal industries. The Boryszew-Impexmetal company will cut employment by almost 1,000 people. The crisis will also affect the furniture sector, where Paged Meble is planning to close three factories, costing 700 people their jobs. The Tele-Fonika Kable cable producer in My¶lenice near Cracow will part ways with 900 employees. Undoubtedly, more such announcements can be expected as 2008 draws to a close.
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