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UPDATE 2-New spike in Russia's jobless rate seen in Sept

Published 07/01/2009, 10:13 AM
Updated 07/01/2009, 10:18 AM
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* Federal Employment Service sees new jobless spike in Sept

* Seasonal workers, new graduates to boost total

* World Bank says labour mkt stabilised, situation difficult

(Adds details, quotes)

By Gleb Bryanski

MOSCOW, July 1 (Reuters) - Russia's top employment official warned on Wednesday a new spike in the jobless rate will take place in September, while the World Bank said the situation in the labour market has stabilised but remained difficult.

Yuri Gertsii, head of the country's Federal Employment Service, said Russia will have 2.6 million people officially registered as unemployed by the end of the year, nearly 400,000 more than at the end of May.

Companies have been slashing jobs, salaries and working hours as lower oil prices, falling world demand for commodities and the global credit crunch have tipped Russia into its first recession in a decade.

May brought some first signs that the bottom may have been reached with the official unemployment rate falling for the first time in months, but with little evidence of industrial revival the reversal is not seen as sustainable.

"From September we expect growth in unemployment," he told a press briefing, noting that seasonal workers will lose their jobs at the end of the summer while many new university graduates will also join the ranks of the unemployed.

The Russian government is trying to perform a balancing act between the interests of businesses, which view layoffs as a way to cut costs and return to profitability, and potential social unrest caused by unemployment and wage arrears.

The most prominent cases of unrest in crisis-hit Russia -- demonstrations in the Far East after a decision to raise import duties for foreign-made cars and a highway blockade in the town of Pikalyovo -- were caused by unemployment and wage arrears. The government plans to throw over $3 billion in 2009 at fighting unemployment through raising benefits, re-training and public works, but the World Bank says the figure needs to be even higher and will help boost consumer demand in Russia.

Russia's labour market was seen as overheated before the crisis with the jobless rate at a historical low and real wages demonstrating double-digit growth. Russia has also drawn large number of migrant workers from neighbouring countries.

IMPOSSIBLE TO FIRE A WORKER

At the end of May, Russia had 2.21 million officially registered as unemployed. But the total jobless figure -- measured according to International Labour Organisation (ILO) definition -- was much higher, at 7.5 million. [ID:nMOS007447].

The discrepancy occurs due to firms forcing their workers to take unpaid leaves or shorter hours. The report said up to 25 percent of all workers in the manufacturing sector have been affected by various forms of shortened working time.

Manufacturing job cuts continued in June but at their slowest pace in eight months, the VTB Capital Purchasing Managers' Index (PMI) showed on Wednesday [ID:nLU119215].

Gertsii said the closure of Russia's gaming halls and casinos [ID:nLS443312], effective from Wednesday, will not have a big impact on unemployment figures.

He said the service had 1.2 million unfilled vacancies. The World Bank report said wage arrears have not become a common response to the crisis despite a significant increase by the end of 2008 while real wages, another form of crisis adjustment, saw only a moderate decrease.

Some businessmen complain that administrative pressure from regional officials, seeking to windowdress their jobless figures to please the Kremlin, stops mass layoffs, which are badly needed by firms that are seeking to cut their costs.

"It has become impossible to fire a worker," said Boris Titov, head of medium-sized business lobby Delovaya Rossiya. Unlike in many other markets, Russian trade unions are weak and do not play a significant role in the labour market.

The World Bank sees total unemployment reaching 13 percent of the work force by year-end [ID:nLO682474], while analysts polled by Reuters forecast 11.5 percent [ID:nRUPOLL2].

Gertsii declined to forecast the year-end total unemployment figure saying the government agencies had to standardise their calculation methods. (Writing by Toni Vorobyova and Gleb Bryanski; Editing by Andy Bruce)

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