Increase in Polish unemployment benefits amid stable labour market

In August, the Labour Market Index (WRP) saw a modest rise of 0.5 points, signaling potential changes in the unemployment landscape. Despite increased volatility over the past year, the WRP remains at the same level as a year ago, indicating that the labour market is currently stable, with no significant cyclical fluctuations. Structural factors, such as ongoing labour shortages, continue to limit major shifts in the unemployment rate, which stood at 5% in July, a slight increase of 0.1 percentage points from the previous month. Since mid-2022, the unemployment rate has hovered within a narrow range, reflecting a balanced market with no major shocks.

However, the WRP’s components present a mixed outlook. While two components suggest a potential decrease in the unemployment rate, five others point towards a possible deterioration in market conditions. A key factor driving concerns is the significant increase in the total amount of unemployment benefits paid out in July, which rose by nearly 10% compared to June. This increase, although substantial, is slightly lower than the 12.5% rise observed in July last year.

The rise in benefits is largely attributed to inflation-driven adjustments in the benefit amount, which are set annually from June to May. This year, the increase in July reflects changes in the benefit amount rather than a surge in the number of recipients. In fact, the number of newly registered unemployed individuals decreased by 5% on a monthly basis after accounting for seasonal factors, indicating that the higher payouts were due to increased benefits for existing recipients.

Although there was a 4% increase in layoffs attributable to employers in July, the absolute number of such dismissals remains low, with around 30,000 cases compared to 60,000-70,000 in 2016-17. Therefore, these layoffs had little impact on the overall amount of benefits paid.

Business sentiment remains moderately pessimistic, with surveys from the Central Statistical Office (GUS) showing a negative outlook on the financial situation of enterprises and employment plans. The balance of responses indicates a higher percentage of companies planning layoffs rather than new hires, though the situation has only slightly worsened on a monthly basis.

Additionally, the number of unemployed individuals deregistering from labour offices due to employment remained unchanged from the previous month but remains low in absolute terms and relative to the inflow of new job seekers. The number of new job offers reported was slightly revised downwards by 5%, yet there were still 1.77 times more job offers than unemployed individuals finding employment. This suggests a significant mismatch between employer expectations and job seekers’ qualifications, leading to a prolonged job search and matching process in the Polish labour market.

Source: BIEC