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Tightening labor market could produce 'sustained' wage growth - MNB

MNB

Cyclical tightening in the labor market resulting from the economic recovery could keep wage growth high, the National Bank of Hungary (MNB) said in a quarterly report, according to news agency MTI.

MNB said corporate labor demand "rose considerably" in past months and faces supply constraints again in certain sectors.

A gauge of business sentiment showed companies were already planning to raise headcount in all sectors in April and May, parallel with an improvement in employment expectations, suggesting those supply constraints "may evolve", it added.

"In view of the tightening labor market, the increase in labor demand will run into supply constraints, presumably resulting in sustained wage growth," MNB said.

Annual wage growth in the private sector stood at 9.8% in 2020 and slowed only slightly to 8.5% in Q1 2021.

MNB pointed out that the impact of the coronavirus crisis on employment in Hungary was muted compared to the effect of the 2008 financial crisis: while the jobless rate rose to 4.2% in April 2021 from a pre-crisis level of around 3.5%, unemployment came close to 11% by the end of 2009.

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