Russian state statistics agency Rosstat announced that for the month of June unemployment decreased slightly to 5.4%, down from January’s 5.5%.
But at the same time, salaries are plummeting and productivity is falling. In fact, according to estimates from the Organisation for Economic Co-operation Russia is the least productive country in Europe, but is second in terms of the number of hours worked (just behind Greece.)
And these two things are bringing back memories of a soviet-style economy, as Bloomberg’s Olga Tanas pointed out: Instead of making things easier for consumers, the government is working on maintaining stability.
“Instead of easing the consumer plight, the stretched labour market betrays an economy geared toward ensuring social stability and ill-prepared to meet the challenges of an ageing and shrinking workforce, content to punt the issue until the next crisis,” writes Tanas.
Russia’s economic health has been deteriorating over the last few months, but the unemployment level is now lower than it was before the conflict with Ukraine started. Putin has put in place laws that offer workers some of the strictest anti-firing rights in Europe, which render the economy inflexible.
But although unemployment is down, real disposable incomes fell by 6% in July year-over-year, retail sales are down 9.8%, and wages adjusted for inflation have plunged 7.5%, according to data cited by Bloomberg, which suggests that July saw faster contractions than June.
“There’s a problem of growing underemployment where people are being put in part time or with part-time pay or put on unpaid leave status because enterprises are trying to protect their profit margins and demand has been suppressed, so they are cutting their production,” said Charles Movit, an economist at IHS Global Insight in Washington told Bloomberg. “So that is going to have an additional impact on consumers.”
“Choosing between radical reforms and stability, the government will favour stability,” said Vladimir Tikhomirov, chief economist at BCS Financial Group told Bloomberg News. “That’s a Soviet-like choice — to conserve the current system with its problems, though to provide stability.”
But if Russian people aren’t pleased with this economic strategy, they’re not saying so.
A July poll from a state research company, VTsIOM, shows that 81% of Russians believe that the situation in the country is excellent, good, or fine, as Bloomberg noted.