Economic Policy Review ISSN 1313 - 0544

The Labor Market Is Recovering, But the Risk of a Lockdown Remains

Author: Adrian Nikolov / 08.08.2021
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The recovery of the labor market from the severe crisis that hit the Bulgarian economy in 2020 continues, and the data give reason for a moderate optimism. However, a full return to pre-crisis indicators has not yet been achieved, especially in terms of the employment.

The main indicator of the current state of the labor market is the number of registered unemployed in the labor offices, as it allows a comparison of the daily dynamics of unemployment over the past three years. The trajectory of the indicator for 2021 is definitely a cause for optimism - unlike 2020, when due to restrictive measures in the spring months the number of unemployed increased by over 100 thousand people, in early 2021 despite the restrictions the unemployment follows the usual seasonal trend for reduction during the summer months.

In mid-July, the number of unemployed reached 169 thousand people - compared to 172 thousand people in the record for the labor market in 2019. Part of the explanation for the very small number of unemployed according to labor office’s data is undoubtedly the expiration of the right to unemployment benefits for many as early as 2020. However, this does not guarantee that they have found a new job - it is just as possible that they have moved into the group of the economically inactive, or that they have found a job without the mediation of employment offices; some may have made a living abroad, but there is no evidence yet.

This can be seen partly by the contraction in the number of employees, as according to the National Statistic Institute “Labor Force Survey”, in the first quarter the number of employees aged 15 and over was 3.03 million people, compared to 3.15 million people in the first quarter of 2019. This difference leads to a contraction of the employment rate for this age group by 1.5 points. It is possible that the opening of the hotels, the restaurants in the resorts and the increased demand for labor in the agriculture has narrowed the gap in the second quarter, but reaching employment levels in 2019 this year seems unlikely.



The dynamics of unemployment at the regional level also shows the improvement in the conditions of the local labor markets. Between June 2020 and June 2021, the unemployment rate fell by 2 to 4 percentage points in all regions, with the decline being most visible in those where the labor market was hit hardest during the crisis year. However, the differences in the unemployment rate between the individual regions remain large, as in the leading economic centers it shrinks to 2-3% of the working population, but in most districts, it remains in the range of 8-10%.

A reason for optimism is the significant increase in the number of vacancies in the labor offices, as at the end of June they are over 30.7 thousand, compared to 22.4 thousand at the end of June 2020. Their number is increasing in all regions except Vratsa, where there is a slight decline, and we must consider the growing role of other (mostly online) channels for hiring new workers. Their growing use is particularly pronounced in the high-tech sector, which was also one of the main sources of new employment during the crisis.

The general review of the labor market situation by mid-2021 shows a relatively rapid recovery. However, the low level of vaccination threatens with the introduction of new restrictive measures in the autumn, and the experience so far shows that they are the main source of new unemployment.