VTB's new Russian employment security index casts shadow over 2016

VTB's new Russian employment security index casts shadow over 2016
By bne IntelliNews March 8, 2016

Russian investment bank VTB Capital launched a new employment security index that is based on measuring Google job searches and it paints a dark picture for 2016.

The index is supposed to be a forward looking index, as the job-hunters have not found a job yet, but it also takes in Russians who currently have a job but expect to get fired in the near future thanks to their companies downsizing.

"[The index] remained elevated in January, possibly reflecting pent up labour market adjustment and ensuring that wage inflation is to remain subdued in the coming months," VTBC economist Alexander Isakov wrote in a report at the end of February.

So far unemployment in Russia has remained at the historically low levels that have characterised Russia's labour market for several years. The ILO unemployment index has remained at about 5.8% of the working population all of last year up to the latest data in February. However, real wages have slumped, falling by 6.1% as of January y/y and real disposable incomes were also down 6.3%.

So far companies have seen profits fall but have absorbed the losses by cutting wages. However, while the headline unemployment figures have remained static, anacedotal evidence of widespread layoffs, reduced working weeks and enforced holidays abound. Still, it seems that so far companies (especially state-owned companies) have managed to absorb most of the fall in profits by cutting wages rather than sacking workers.

The headline nominal wage growth for December was revised upwards from the initial estimate of 1.6% y/y to 3.4% y/y. January's estimate is lower at 3.1% y/y and the public/private and tradable/non-tradable sector dichotomy remains in place, reports VTBC.

"Public sector wage growth remained negative for the second month [in January], printing - 0.2% y/y on public administration (-5.0% y/y) and a slowdown in education (+2.3%) and health care (+0.9%)," Isakov said in his report. "The private sector is in better shape, propelled by tradable sectors like agriculture (+10.3%) and manufacturing (+7.1%) while the hotels & restaurants segment saw a contraction of 0.8% in nominal terms."