Soaring wages, record-low unemployment underscore Russia’s labour squeeze
2024.06.05 12:49
By Alexander Marrow and Darya Korsunskaya
(Reuters) – Russia’s unemployment rate dropped to a record-low 2.6% in April and real wages soared in March, data published by the federal statistics service showed on Wednesday, highlighting the extent of Russia’s tight labour market.
Moscow’s heavy spending on defence and security as it wages war in Ukraine has helped Russia’s economy rebound from a 2022 slump, but economists say the growth relies on state-funded arms and ammunition production, masking problems that hamper any improvement in Russians’ living standards.
“Our economy is definitely and severely overheated,” German Gref, CEO of dominant lender Sberbank said in the upper house of parliament on Tuesday. “We have never in our history had our main capacities so overloaded.”
A central bank survey of Russian companies showed production capacity at a historically elevated level of 81% in the first quarter.
“This is a limit above which it is simply impossible to move,” Gref said.
Many officials have flagged the labour shortage as a key concern, aggravated by a military mobilisation in 2022 and the emigration of hundreds of thousands of people since Russia invaded Ukraine. The central bank has repeatedly said it is the key constraint on increasing output.
Real wages, which are adjusted for inflation and reported with a one-month lag, leapt 12.9% year-on-year in March, the statistics service, Rosstat said, above analysts’ expectations.
Economists say wages are growing fastest in parts of the country with high concentrations of defence industry work.
Wages are a sensitive issue in Russia, where years of high inflation have eroded citizens’ purchasing power. Despite rising real wages, real disposable incomes have been stagnant over the past decade.
Weekly consumer inflation rose 0.17%, Rosstat data showed, just two days before the Bank of Russia sets interest rates on Friday.
Analysts polled by Reuters on Monday were leaning towards a hold at 16%, although a quarter of those surveyed predicted a hike to 17% as inflation remains stubbornly high and well above the bank’s 4% target.
Growth in retail sales, a key gauge of consumer demand, eased to 8.3% in April form 11.1% in March, offering the central bank a crumb of comfort as it looks to bring inflation down.
