CEE: Job vacancies decline across the region

On the radar

• Average wage growth in Hungary landed at 9.0% y/y.
• Current account deficit increased to EUR -247.4 million in Serbia in April. Today, Slovakia will show current account position.
• In the afternoon Czechia’s central bank is holding interest rate decision and hike is quite likely.

Economic developments

Today we look at labor market tightness in the region, in particular at the job vacancy rate that measures the share of vacant posts in total labor demand. A higher vacancy rate signals that firms have a relatively large number of unfilled positions compared with existing employment, implying stronger labor demand and potentially more difficulty in recruiting workers. Conversely, a lower vacancy rate points to softer labor demand and reduced hiring pressure. The situation that we are currently observing as comparison between 1Q22 and 1Q26 indicates a broad-based easing in labor market tightness. We chose 1Q22 for comparison as for most of the EU and CEE countries this quarter marked a peak in labor market tightness. At the EU27 level, the job vacancy rate declined from around 3.0% in 1Q22 to approximately 2.1% in 1Q26. Within the CEE region, the decline is particularly pronounced in Czechia, where the vacancy rate fell from around 5.3% in 1Q22 to roughly 1.8% in 1Q26. Czechia therefore moved from an exceptionally tight labor market with the highest vacancy rate in CEE in 2022 to a much more moderate position. A similar, albeit less extreme, adjustment can be observed in Slovenia, where the vacancy rate decreased from around 3.2% to 2.5%. By contrast, Poland, Romania and Slovakia show relatively low current vacancy rates. Poland declined from around 1.3% to 0.8%, Romania from 1.0% to 0.6%, and Slovakia from 1.1% to 0.9%. These levels suggest a relatively limited degree of labor market tightness at present, with fewer signs of strong hiring pressure. Easing of labor market tightness should translate into lower wage pressure and overall lesser demand pressure in the economies.

Market movements

Today, Czech central bank holds a rate setting meeting that will be a key event in the region. Currently, markets are pricing in a hawkish central bank move that is the short end is discounting a likely rate hike from 3.50% to 3.75%. Further, money markets positions for possibility of further monetary tightening. The Czech koruna held near 24.10 ahead of the meeting. Arguments for a hike include sticky core inflation, strong wage growth, services and housing price pressures. On the other hand, May CPI decelerated to 2.1%, commodity prices have visibly eased on the news on peace deal and overall softer growth outlook is expected. As far as global central banks are concerned, Fed kept interest rates steady in first decision under Kevin Warsh. He began his tenure as chairman of the Federal Reserve with a solemn vow to curb inflation and a clear sign that he plans to swiftly revamp how the US central bank does its job. Further, half of individual Fed members expect to hike rates before year-end. Coming back to the region, in Poland, the Ministry of Finance sold seven bond series at the regular June auction for a total of PLN 12.0bn against demand of PLN 18.3bn, followed by a top-up auction of PLN 791m the same day. In Romania, Prime Minister designate Vestea is struggling to form a government but he will seek confidence vote anyway.

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