Data released today by the National Institute of Statistics (INS) points to the labour market entering the mature phase of the post-crisis cycle, amid wage pressures and rising risks to the medium-term investment climate.

The number of unemployed people (ages 15-74) rose by 3.7% month-on-month to 477.6 thousand in July, the highest level since March.

The unemployment rate increased from 5% in June to 5.2% in July, a four-month high. For men, the unemployment rate rose from 5.9% in June to 6.2% in July, the highest since October 2016. The unemployment rate for women increased from 3.7% in June to 3.9% in July.

In the period January to July 2017, the number of unemployed decreased by 14.8% year-on-year, while the average unemployment rate fell by one percentage point year-on-year to 5.2% (5.9% for men and 4.1% for women), a development shaped by the interplay of opposing forces:

1. Favourable momentum in exports and private consumption, a shrinking informal economy, outward migration of the working-age population, and an acceleration in hiring ahead of higher financing costs and renewed wage pressures, on the one hand;
2. Rising wage costs and mounting risks to the medium-term investment climate, on the other.

In the central macroeconomic scenario at Banca Transilvania, we forecast a short-term shift in the labour market cycle (from improvement to deterioration), against the backdrop of the post-crisis economic cycle nearing its end, higher costs (wages and financing) and a build-up of risks to macro-financial stability.