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Phantom fall in Cyprus jobless numbers

By Fiona Mullen

In the run-up to the elections, the government has naturally made the most of figures showing that Cyprus has recorded the fastest fall of recorded unemployment in the EU.

Reporting on the results for March, Eurostat said: “The largest [year-on-year] decreases were registered in Cyprus (from 16.2% to 12.1%), Bulgaria (from 10.0% to 7.3%) and Spain (from 23.0% to 20.4%).”

There is no doubt that registered unemployment in Cyprus is falling.

In April it dropped to 36,986 individuals, or by 13.1% compared with April 2014. This is the fastest pace of decline since May 2008, according to my records.

The problem with registered unemployment, however, is that it does not measure everyone who is out of work. The unemployed receive benefits only for six months, and qualify for benefits only if they have also made social insurance contributions via previous work.

By definition, therefore, it does not catch those who no longer register because they are no longer eligible for benefits, those who have generally given up looking for work or many of those who have never worked.

For that, you need to take a hard look at the quarterly Labour Force Survey (LFS).

Analysis of the LFS reveals a 16,666 year-on-year decline in officially recorded unemployment in the fourth quarter. Unemployment was reported at 53,021, or around 27% higher than registered unemployment of 41,723 in the same period.

However, even the LFS numbers can be deceptive. Using international definitions, the LFS counts you as both ‘unemployed’ and a member of the ‘active’ labour force only if you are available and willing to work.

If you have simply given up looking for work, or if you are looking after a sick relative so cannot work, you are shifted from the ‘active but unemployed’ to the ‘inactive and not in the labour force’ category.

Interestingly, during the same quarter in which the number of people counted as ‘unemployed’ dropped year on year by 16,666, the number of jobless people counted as ‘inactives’ shot up by 13,764. Moreover, another 8,493 people left the country in the same period. Since they were probably driven out by poor job prospects, their departure also helped to cut the number of recorded unemployed.

Meanwhile, the number of people in employment declined by 4,356 year on year in the fourth quarter.

In sum, therefore, the number of jobless did not fall in the fourth quarter. Employment actually fell and the jobless were either shunted to a different (less visible) category or simply left the country.

If you really want to know about jobs growth, therefore, look at employment. For that we need to wait until late June, when the LFS figures for the first quarter are published.

Until then, there is little to celebrate, as the fall in joblessness so far may be nothing but a myth.

Fiona Mullen is Director of Sapienta Economics and author of the monthly Sapienta Country Analysis Cyprus www.sapientaeconomics.com

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