Israel maintained a historically low unemployment rate and high level of participation in March, defying warnings from the Bank of Israel that the labor market’s strength would moderate in 2014.
Unemployment dropped 0.1 percentage point to 5.8 percent, while the labor participation rate remained at a record high of 64.2%, according to figures released by the Finance Ministry on Tuesday. The overall employment rate, which measures what portion of working-age people are employed, rose to 60.5%, a historically high level for Israel.
In November, Bank of Israel Governor Karnit Flug predicted that the jobless rate would soon rise, a result of moderate global growth and struggling exports. The unemployment rate at the time was 6.1%.
“An assessment of the composition of the labor market shows that growth in the number of employed persons is concentrated in the public services, while employment in the business sector has been at a standstill for a long time,” Flug said at the time.
The bank’s outlook has not changed significantly, and the reversal may yet come through the end of the year. In its April interest-rate discussion, the bank’s monetary committee noted that improvements in the labor market still do not indicated “a change in the trend seen over the past two years, in which employment of Israelis virtually did not increase in the business sector, while it increased in public services.”
The increase in employment came from greater participation in parttime work, the Finance Ministry said.
Israel’s main trade partners have also continued growing at lower than hoped for rates.
Yet all in all, the Finance Ministry found a rosy economic outlook in its most recent economic assessment, with improvements in industrial production and sector productivity.
From a fiscal perspective, too, there was good news.
In March, the Finance Ministry took in NIS 21.7 billion in taxes, a half billion more than expected. Adjusted for inflation and seasonal changes, that amounts to a 1.5% increase from the previous month, all of which came from direct taxes, such as income tax and corporate tax.