Daily Israel Report

Unemployment Drops, Demand for Workers Rises 40%

Unemployment is down and the demand for workers is up sharply. But as the economy recovers, dark clouds loom. Uncertainty over the expulsion plan is causing the TASE to drop and the shekel to sink.
First Publish: 6/20/2005, 2:48 PM / Last Update: 6/19/2005, 6:40 PM

Unemployment dropped in April to 9.1% of the workforce, marking a significant decline from April 2004, when unemployment stood at 10.6%. Despite the improvement, however, 245,000 Israelis remain without work.

May’s figures are likely to show a further decline in unemployment, as demand for workers rises sharply. Figures released by the Israel National Employment Service show that demand for workers rose by 40% in May in comparison with May of last year. The rise was even more pronounced, 54%, when compared to April 2004.

In other positive economic news, Israel’s agricultural exports for the first quarter of this year were up by 15% as compared to the same period last year, totaling $500 million. Exports of citrus fruits showed the biggest gain, 43%, followed by flowers and houseplants, up 11%. Potatoes and other vegetables were exported at a 6% higher rate than last year.

Israel’s exports to the United States also showed good results during the March-to-May 2005 period, rising by 12.2%. The jump was primarily due to the rising value of the dollar relative to the shekel.

Israel’s economic recovery might be jeopardized, however, by the uncertainty that is starting to grip the country as the timetable for implementing the expulsion plan approaches.

Since the Shavuout holiday, the shekel has depreciated substantially against the dollar, and the Tel Aviv Stock Exchange (TASE) has begun to lose ground after attaining record highs just a short while ago.

A manager of one of Israel’s leading mutual funds called the recent run from the shekel to the dollar “a stampede." He attributed the TASE’s recent decline to investors pulling out of the stock market into dollar-denominated funds.

Some TASE stocks have lost over 20% of their value, with economists suggesting that the decline goes beyond typical profit-taking in a bull market. A likely explanation for the drop is uncertainty over the situation in Israel as the government moves closer to implementing its decision to destroy 21 Jewish communities in Gush Katif and four more in northern Samaria.

According to the economic journal The Marker, 200-300 million shekels were pulled out of the market on Sunday alone.

Where the latest trend leads depends greatly on the response of foreign investors, who have reportedly been selling large amounts of shekels over the past week.