Summary:

  • The Israeli labor market was in a situation of full employment when the global crisis began to affect it and thus weathered the crisis, during the first half of 2009, with only a moderate increase in unemployment relative to the developed economies and without a major decline in employment. The market started to recover already in the second half of 2009 and unemployment began to decline, even while it was increasing in the advanced economies.  
  • The global crisis was manifested in the labor market by a sharp drop in the demand for labor during the fourth quarter of 2008 and a recovery in the second half of 2009.  
  • Employment remained stagnant from the beginning of 2008 and despite the crisis did not decline in 2009. This was a result of several factors: the reduction in work hours per employee, flexibility in the composition of employment by industry, a decline in real wages in the business sector and a rapid recovery in the demand for labor.  
  • The standstill in employment--particularly in the business sector-since the beginning of 2008 and the decline in the average work hours per employee towards the end of this year led to a drop in aggregate labor input. In addition, the stagnation in employment and the natural labor force growth led to a moderate increase in the rate of unemployment to a level of 7.6 percent in 2009.  
  • The stagnation of employment in the business sector reflects a decline in employment in the manufacturing and construction industries and an increase in employment in other industries, such as finance and business services. Employment fell in industries intensive in unskilled labor, both in manufacturing and non-manufacturing. In contrast, the drop in employment in manufacturing industries intensive in skilled labor was fully offset by the increase in employment in non-manufacturing industries intensive in skilled labor.  
  • There has been an increase in recent years in the number of Palestinian workers from the territories in the Israeli economy, whose income represents more than 10 percent of Palestinian GDP. The low level of their wages is liable to create downward pressure on the wages and employment of unskilled Israeli laborers.  
     
     The Labor Market - Full File