Turkey: Unemployment rate at 12.2% in January with the change in methodology

TurkStat made the expected methodology change in unemployment rates this month and started to announce it co-periodically with Europe, using a revised calculation method and in line with ILO standards.

TurkStat made the expected methodology change in unemployment rates this month and started to announce it co-periodically with Europe, using a revised calculation method and in line with ILO standards. Accordingly, the unemployment rate, which was previously announced as the average of the 3-month period, will be announced on a monthly basis from now on. Therefore, although we see slightly different data from the usual data, we observe that unemployment decreased in January compared to the new data.

 

In January, the unemployment rate in Turkey was realized as 12.2% compared to the same month last year’s 12.8%, with a decrease of 0.6 points. Compared to the previous month, it is observed that the adjusted unemployment rate decreased by 0.4 points. While the youth unemployment rate was 24.7%; Non-farm unemployment stood at 14.2%.

 

When we look at the comparable periods January 2020 - January 2021, it is seen that there is a 1.6 point decrease in the labor force participation rate between the relevant periods with adjusted data. The workforce, which was 31 million 933 thousand people in the similar period of 2020, became 31 million 567 thousand people in January 2021. Labor force participation rate decreased from 51.5% to 49.9%. Again, looking at seasonally adjusted data; While the employment rate decreased by 1.1 points compared to the same period of the previous year and became 43.8%, there was an increase of 822 thousand people in seasonally adjusted employment compared to the previous month.

 

Part of the decline in the official unemployment rate in January can be explained by the continuation of the economic growth achieved in 4Q20. As a result, despite the methodology change, it is obvious that the narrow-scope definition of unemployment rate of TURKSTAT is far from reflecting the real situation. In the graph, you can see the comparison of TURKSTAT's narrow (official) unemployment rate and broader unemployment rates. Since April, the number of people who have somehow left the workforce, who are in idle employment or have no hope of working has increased significantly. The increase in the wide-ranging unemployment rates while the official unemployment rate is falling can be explained by the very high rate of exit from the labor force. As a matter of fact, when we add them all, a very high rate of 29.1% emerges. With the effect of the pandemic, the unpaid leave application and the ban on dismissal kept the official unemployment rate at low levels. It seems that the difference between narrow and wide-ranging unemployment rates is widening in terms of general trends.

 

While the dismissal ban and cash wage support, which have an important place among the employment incentives, were extended for another 2 months, no statement was made regarding the short-time work allowance. The general request of the sector and employer representatives is to extend the short-time work allowance, which is an important incentive. If it is not extended, a further widening of the unpaid leave application and an increase in the idle employment situation could be revealed. The President has the authority to extend employment incentives until June 2021. In fact, even if the incentives are extended, these are short-term solutions, and layoffs will increase with the end of the summer incentives. Another problem is that this would be happen probably in a year of high economic growth.

 

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