How many Israelis are out of work? Policymakers struggle to understand the data

Central Bureau of Statistics says in first half of June the official unemployment rate was 5.2%; national employment service puts number of jobless around 20%

Shoshanna Solomon

Shoshanna Solomon was The Times of Israel's Startups and Business reporter

Israelis protest in Tel Aviv's Rabin Square against the government's economic policies during the coronavirus pandemic, July 11, 2020. (Jack Guez/AFP)
Israelis protest in Tel Aviv's Rabin Square against the government's economic policies during the coronavirus pandemic, July 11, 2020. (Jack Guez/AFP)

Inconsistent data and varying definitions about the number of unemployed people in Israel are creating confusion, with official statistics not a true reflection of the situation on the ground — making it harder for policymakers and economists to respond, as they feel they are working in the dark.

“Nobody has a clear estimate about the number of unemployed today” as a result of the coronavirus, Yaniv Bar, a research economist at Bank Leumi Le-Israel Ltd., said in a phone interview.

There are differences between the figures put out by a number of bodies, including the Central Bureau of Statistics (CBS), which publishes the nation’s official unemployment figures, the research department of the Bank of Israel, and the National Employment Service, which keeps track of the people who have signed up to seek jobs.

“We are working in a fog,” Bar said. “The data collection process has been messed up. There is a lot of uncertainty around this subject.”

Yaniv Bar, research economist, at the economics department at Bank Leumi Le-Israel Ltd. (Kfir Sivan)

The CBS, for example, said that in the first half of June 2020, the official unemployment rate was 5.2%. This figure, however, does not include those who are temporarily without a job, such as workers who were furloughed due to the coronavirus. When adding those statistics, the rate jumps to over 10%, according to the CBS.

Meanwhile, the National Employment Service issues daily data on the number of people who are seeking work compared to the formerly jobless who report they are back to work.

There were 853,843 people seeking work via the employment service on Wednesday, of whom 575,163 are furloughed workers. The unemployment rate stands at 21%, the Employment Service said. Also on Wednesday, 1,517 people said they had returned to work, while almost double that amount – 3,289 – were newly signed up as job-seekers.

On July 9, the Bank of Israel published its research department’s estimate, which forecast that the unemployment rate – using CBS data for people aged 25-65 – will be 6.2% this year and 7.4% in 2021. But a newly coined “wider unemployment” figure, which takes into account the unemployed, the temporarily unemployed, and those who have exited the workforce — puts this figure at over 25% in the second quarter of 2020, and at 10%-15% by the fourth quarter of this year.

Israelis protest in Tel Aviv’s Rabin Square against the government’s economic policies during the coronavirus pandemic, July 11, 2020. (Jack Guez/AFP)

Israel has reimposed restrictions on economic activity, including closing down bars and event halls and locking down whole neighborhoods, in light of a new spike in coronavirus infections.

The original lockdown measures that began in mid-March brought the economy to an almost-total standstill. Unemployment figures jumped from a record low of under 4 percent at the beginning of March to some 28% in late April, according to Employment Service figures, as many businesses were forced to close their doors, and the number of unemployed surpassed 1 million for the first time in Israel’s history.

As infection rates declined, the country removed most of its restrictions by May to reopen the economy, and then experienced a renewed flare-up of the virus. High unemployment may prove the biggest obstacle on Israel’s road to recovery, experts fear.

“Normally we look at the official unemployment figure” for economic projections, Leumi’s Bar said. But “these days, when the official unemployment rate does not represent what is actually happening on the ground, we must look for alternatives.”

“In practice, we know there are many more people without employment than the official number of unemployed,” he said, adding that all sort of numbers “get tossed in the air” in an attempt to get a handle on the situation.

The people who are furloughed — on unpaid leave, and eligible for unemployment — make the forecasts more difficult, as “we don’t know that all of those who are furloughed will exit the work force and become really unemployed” because some will be able to return to their jobs.

The bottom line, Bar said, is that “we are in a period of a lot of uncertainty” in which technical definition differences create different pictures, without anyone really knowing what figure they need to work with.

Self-employed Israelis protest at Rabin Square in Tel Aviv, calling for financial support from the Israeli government on July 11, 2020. (Miriam Alster/Flash90)

The official rate of unemployment is set according to clear international rules via which the Central Bureau of Statistics, the body tasked with issuing the data, calculates the figure.

The definition of unemployed by the Central Bureau of Statistics is that of persons aged 15 and over who did not work at all in the previous week (even for one hour). These people must have actively sought work during the four weeks preceding, by registering with the Employment Service or by applying for work with employers in person or in writing, or in any other way, and must have been available to start work in that week had suitable work been offered. In other words, a person who is unemployed is someone who is looking for work and has no ongoing connection to a workplace.

The Employment Service, on the other hand, includes in its definition everyone requesting unemployment benefits. These can be people who have been fired, whether they are currently looking for work or not, and people who have been furloughed, who are likely to get back to work but are eligible to unemployment benefits in the meantime. So, the Employment Service figures include people who have an affiliation with a business and are thus not looking for work. These workers would not be included in the unemployment figures of the Central Bureau of Statistics, because they are not actively looking for work.

Incidentally, under Employment Service criteria, even those who had more than one job and were furloughed from one of them, and getting unemployment benefits, would be included. People requesting unemployment benefits can be unemployed, employed but furloughed, or not part of the workforce at all as they are not seeking work.

Illustrative: A man walks past a closed branch of the Castro fashion chain in downtown Jerusalem on April 26, 2020. Most stores were allowed to reopen, but many major chains stayed shut, with their owners demanding government compensation for lost business amid the COVID-19 crisis (Yonatan Sindel/Flash90)

Gloomy data for July

Meanwhile, the Central Bureau of Statistics (CBS) on Tuesday published a gloomy picture for the first two weeks of July, with data showing that the number of unemployed people surged to 7.6% on July 8, compared to 4.5% on June 17, as the coronavirus continued to wreak havoc on the economy.

The survey is the seventh such survey conducted by statistics bureau since March 2020, when it started monitoring the impact of the pandemic on the economy. The current survey of 1,400 businesses that employ five or more workers was conducted in a number of sectors: high-tech, industrial, construction, retail commerce, financial services, insurance, and food and beverage – including restaurants, food stalls and events halls.

The survey included some 1.45 million employees, accounting for 34% of the salaried workers before the start of the pandemic.

The data shows a deterioration in all of the sectors, with the number of employed people in all of the sectors having dropped to 79.6% from 81.5% mid-June.

The biggest number of layoffs occurred in the food and beverage services sector, 13.5%; and in the construction sector, 10.8%.

The numbers of workers who were furloughed fell to 7.3% in the first two weeks of July, versus 8.4% mid-June, as the government handed out grants to employers who hired furloughed workers.

Even so, the rate of return of these workers to jobs has slowed significantly compared to previous surveys, and a return to work was evident mainly in the industrial and retail sectors.

In the high-tech sector, the number people who lost their jobs rose to 7.1% since the start of the crisis, compared to 4.5% in mid-June. Three percent of tech workers are furloughed, versus 3.8% in the previous survey.

The survey also shows that 19.6% of respondents expect a severe hit of more than 50% to revenue, lower that what businesses estimated in mid-June. Many attributed this to a drop in local demand, while other said it stemmed from the directives imposed by the government. Businesses also complained about a lack of liquidity and credit.

Just under a quarter — 24.9% — of companies said they have halted or postponed the recruitment of new workers. This was especially prominent in the high-tech sector, the data showed, where 45% of businesses said they were delaying or halting employment plans.

Businesses also said they have improved their technological capabilities to allow work from home, and have entered new markets or changed the makeup of their customers. Some 18.3% of respondents said they added deliveries to their services, and 14% added online sales.

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