Wh ile the US economy has been reeling in recent months from labor market data – huge monthly job losses, sharp increases in unemployment, the Israeli economy has not yet begun to show any significant effect of the economic slowdown on the labor market. The last data point for unemployment – October 2008 – shows the unemployment rate steady at 6% since May, but with no sign of any upturn. Given clear weakness in many indicators of economic activity, no-one in Israel believes that unemployment w ill not start increasing, but unt il the data show the increase, analysts can argue that the slowdown in Israel could well turn out less severe than in other economies around the world.  

However, unemployment is only one indicator of labor market developments and not necessar ily the most important. Other labor market indicators are already showing signs of weakness. One is the number of help-wanted advertisements (shown in the graph): called in the professional jargon a marginal employment indicator, this variable often tends to lead other labor market indicators – that is, it tends to change direction (showing a recession or a recovery) before other labor market or macro-economic indicators change direction.

The graph shows a sharp downturn in this indicator of the demand for labor in the final months of 2008, both in total help-wanted ads and in ads for hi-tech personnel. A breakdown of the total into economic sectors shows a sharp increase in the demand for labor in practically every economic sector at the end of 2008: the general nature of the decline in demand by economic sector is a further proof that the decline is a macro-economic development rather than one characterizing only certain sectors of the economy.

If unemployment data are st ill not showing any signs of increase, a partial indicator of unemployment certainly is: the number of job seekers at labor exchanges run by the government's Employment Service has been increasing stead ily since Apr il 2008 through November (the last figure ava ilable). In past periods of economic weakness, an increase in the number of job seekers has tended to begin prior to the increase in total unemployment, and this may well be the case in the current period of economic weakness.

Analysts st ill want to see data showing an increase in unemployment, before they fully believe that there are serious labor market implications as a result of the economic slowdown. They may well get a first chance to do so on 20 January, when unemployment data for November 2008 are due to be published, and again during February when the Labor Force Survey – the most complete dataset on labor market developments – for the 4^th quarter of 2008 w ill be published.

Once the data show that unemployment has begun to increase, the main question w ill switch to: how high w ill the unemployment rate go? At the moment, that is anybody's guess.    

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