UniCredit analysts see labor conditions in Romania deteriorating, don't expect wages to increase faster than productivity

Labour conditions in Romania could deteriorate over the next months on the back of low external demand, despite some modest positive correction of the weather-related slowdown in manufacturing and construction.

Service sectors like finance and insurance, administration and public services could see further layoffs in the country, according to a recent report on the labor market by UniCredit. UniCredit analysts don’t expect wages adjusted for inflation to grow faster than productivity gains, so that macroeconomic imbalances coming from the labor market -such as huge imports of consumer goods resulting in a wide current account deficit in 2004 – 2008- will be avoided in the future. Employment in manufacturing and services rose 3.9 percent and 5.8 percent year-on-year in April this year, decelerating against the first quarter of 2012. Construction saw some positive development, as employment was up 12.8 percent year on year, triggered by the rebound of construction activity, especially in infrastructure projects. The average net wage rose to RON 1,553 (some EUR 353) in April 2012, 3.7 percent higher than in April 2011. Meanwhile, the unemployment rate rose to 7.4 percent in April from 7.2 percent in March 2012, with the number of unemployed people up 4,000 to 720,000 in Romania. UniCredit analysts estimate the unemployment rate could rise to 7.5 percent during the summer if European economies remain weak. Summer might be slow for hiring. According to surveys published by the European Commission, companies expect lower employment during May – July 2012 in services and construction sectors, while a moderate increase of employment is expected in the industry sector. Regionally, Romania and Bulgaria registered the fastest growth in labor costs, with latest available figures at 8.6 percent y-o-y and 12.6 percent y-o-y in the last quarter of 2011, which reflects the reducing gap with neighboring countries. The average monthly wage has been around EUR 350 per person in Romania, less than half of the wages of other CEE countries. editor@romania-insider.com