Achilles' high heel: Tech industry has become the weak point of the labor market
Achilles' high heel: Tech industry has become the weak point of the labor market
With the increase in interest rates, inflation, and now the collapse of the banks, will the Israeli labor market continue to maintain stability? The high-tech market is already showing signs of weakness, with the supply of jobs decreasing and the number of job seekers jumping by 20%
Every additional blow that the Israeli labor market takes raises the question: will this be the time when it can’t take it anymore? In recent months, its stability has been tested by the increase in interest rates and global inflation, and recently the judicial reforms, bank collapses, and the fear of a recession in the United States. The encouraging news is that despite everything, even now it is in a pretty decent condition.
The Israeli labor market successfully weathered the 2008 crisis and, like most developed countries, recovered very quickly from the coronavirus crisis.
The employment rate rose in January for the third time in a row and stands at 61.4%. This is one of the better figures since the end of the coronavirus crisis, and yet it still fails to grow significantly beyond the levels of 2019. The unemployment rate stands at 4.1% - a very low and encouraging figure - but at the beginning of 2022 it was closer to 3%.
There is no doubt that the weak point of the labor market is high-tech. The closures during the coronavirus crisis had a positive effect on high-tech, but at the moment its greatest weakness is exposure to the world market and especially the American one - whether direct exposure through deposits in the failing banks or indirectly.
On the face of it, high-tech only accounts for around 10% of the workers in Israel, but in practice these are businesses and workers with large incomes, and the ability to spend large amounts, which affect the entire economy. This can be seen in the number of vacant jobs in the economy as a whole, which currently stands at 143,000, a little less than the peak at the beginning of 2022, which was 150,000. On the other hand, before the coronavirus crisis, the supply of vacant jobs stood at 100,000.
One area which has experienced a negative change is the number of vacancies for software engineers in the high-tech market, which has dropped by more than half from 14,100 in January 2022 to 7,000 in January 2023. The decrease in vacancies is mainly due to the decrease in the huge demand that existed until a year ago for software professionals. In the rest of the economy there is still plenty of demand, especially for low-wage jobs, and for every vacant position there are only 1.1 job seekers.
According to employment service data, the number of high-tech job seekers has increased by about 20% in recent months. It seems that at some point the 7,000 vacancies will also be filled, creating a real problem in one of the most important sectors of the Israeli economy.
The difficulty in predicting the scope of the crisis stems not only from the strength of the Israeli labor market but also from the fact that no one knows if there will be a recession in the United States and how deep it will be. There, too, the number of vacancies is very high. In the near term, an increase in unemployment rates to 5% will be considered a deterioration and above 6% will be a big surprise. The consequences of the judicial reform, if it comes to fruition, will only be felt in the longer term.
First published: 14:08, 15.03.23
