Employment keeps growing in the region

On the radar

• The FOMC meeting is scheduled for today and interest rate cut is broadly expected.

• In Croatia, final inflation number was confirmed at 1.8% y/y in August.

• There are no release scheduled for today in the CEE.

Economic developments

In the second quarter of 2024, the employment rate for people aged 20-64 in the EU was at 75.8%, showing a 0.2 percentage point increase compared to the first quarter of 2024. At the same time, labor market slack decreased marginally to 11.0% in the second quarter of 2024 compared to the first quarter. The job vacancy rate also declined to 2.4% in the second quarter of 2024 and remained lower than the peak of 3.1% in 2Q22. We also analyzed the broader employment changes in the first half of the year. Employment in the EU increased by 0.4 percentage point, with all CEE countries experiencing growth, particularly Croatia with an increase of almost 3 percentage points. In 1H24, employment changes were mildest in Poland (0.2 percentage point) and Czechia (0.1 percentage point), but Czechia rebounded strongly in 2Q24 by 1 percentage point compared to 1Q24 when it saw a drop in employment. Employment growth in 1H24 was more substantial in most of the countries than it was in 2023, with the exception of Poland and Czechia, where employment grew by a higher margin in 2023.

Market developments

In the markets, all eyes were on the FOMC meeting with a rate cut almost certain, most likely by 25bp. The inflation data confirm the overall slowdown in price momentum. The pressure on the FOMC to act comes less from the inflation data and much more from the labor market, as July's data showed a clear downturn, which did not continue in August, but there was no countermovement either. On local news, Slovakia had an eventful day as the ruling coalition removed the opposition leader from the post of deputy speaker of parliament, breaking a longstanding tradition where opposition parties have one deputy speaker. Furthermore, the Slovak government proposed a budget package worth EUR 2.7 billion, including the introduction of higher taxes (value-added tax rate will increase to 23% from 20%, and a transaction tax will be introduced) to reduce the general government deficit to 4.7% of GDP in 2025. Fitch Ratings warned Romania to take rapid measures to limit the surge in their budget deficit, which has become the largest in the European Union, in order to avoid losing its investment-grade score.

Download The Full CEE Macro Daily