The rate of unemployment in Israel has fallen to pre-Covid lows. Unemployment in July 2023, seasonally adjusted, fell in July to 3.4% from 3.6% in June, the Central Bureau of Statistics reports. At the same time the rate of employment and percentage of participation in the work force also fell slightly in July compared with June.
The level of unemployment has fallen to the same very low level - 3.4% - as it was in February 2020 on the eve of the Covid crisis.
Salary spiral
The very low level of unemployment is bad news in the fight against inflation as the tight job market is likely to cause upward pressure on salaries, which will fuel inflation, if the Bank of Israel's rate hikes are unable to tame inflation.
These salary pressures were seen in June 2023 when the Central Bureau of Statistics reported that the average salary rose by 6.3% compared with June 2022, higher than the 4.2% annual rate of inflation.
Bank of Israel Governor Prof. Amir Yaron has said on several occasions in the past that the tight job market is a major element weighing on the fight against inflation. The tight job market will clearly be a significant factor in the Bank of Israel Monetary Committee's decision on whether to increase the interest rate again at its meeting in early September, Globes reports.
