Economic Crisis Hits Employment Figures

As the financial crisis tightens its grip on the nation's economy, companies are slashing jobs and shortening workweeks while authorities scramble to find ways of keeping unemployment numbers from ballooning out of control.

Although Prime Minister Vladimir Putin said in his televised question-and-answer session Thursday that the number of unemployed is expected to rise from 1.7 million to 2 million people in 2009, some experts believe that the numbers might not tell the whole story.

One problem may lie in "hidden unemployment," the practice where companies nominally keep workers employed and instead cut hours and salaries, said Alexandra Evtifyeva, Senior Economist at VTB Capital.

"Sectors such as agriculture, construction and real estate and retail have a lot of leverage and liquidity problems," Evtifyeva said. "They have to optimize their cost structure, cut capital expenditures and optimize labor costs."

Workers should not expect mass unemployment, said Yevgeny Gontmakher, director of the Social Studies Center at the Russian Academy of Sciences Institute. But for some industries and regions, a slowing economy could cause serious problems.

"Unemployment will largely be concentrated in certain cities and regions, factory towns, for example," he said. "It's a dark forecast for places where there are auto or chemical plants."

While not widely reported on television news broadcasts, looming unemployment has nevertheless captured the country's attention.

The two-month-old web site Sokratili.ru, which chronicles the nation's largest firings, is now one of the 20 most-popular Russian web resources, Prime-Tass said Tuesday.

Last week, the web site reported that Russian Railways had reduced employees' working hours, Novosibirsk Metallurgical Plant had sent 75 percent of its employees on leave for December and a local mine had closed in the Chelyabinsk region, resulting in the loss of all 3,000 employees' jobs.

In his Thursday address, Putin urged companies and local authorities to take measures to prevent further job losses.

"I still hope we won't have mass unemployment, but the number of people to temporarily lose jobs will certainly increase," he said. "Municipalities, regional authorities and enterprises themselves will have to institute a range of measures to save jobs wherever possible and do so literally in the next few days."

Putin also proposed several measures to stave off the impact of approaching layoffs, including raising monthly unemployment allowance to 4,900 rubles ($175) next year and cutting quotas of foreign workers to 50 percent.

The government will likely encourage enterprises to retain as many workers as possible, economists said, especially companies that are benefiting from government bailout money.

"The state is helping these large monopolies, which are at the core of the economy, plus socially important sectors where a lot of people are employed. Gazprom has a half million people employed," Evtifyeva said.

Officially, the number of registered unemployed in the country has actually dropped from 1.5 million at the beginning of the year to 1.29 million in October. The Federation of Independent Labor Unions, also known as FNPR, admitted that it has not been completely forthcoming with its information on layoffs taking place across the country.

"We receive information that is strictly confidential, and if released, may affect the share prices of certain enterprises," FNPR secretary Nina Kuzmina told the newspaper Nezavisimaya Gazeta last week.

The state has said it will keep jobs in Russian hands, yet reducing the country's foreign worker quota by 50 percent may not necessarily be the best option, Gontmakher said.

"People will move to Russia all the same. If there are fewer opportunities for legal immigration, then we'll just have a lot of illegal immigrants," he said.

A silver lining may exist, however, in the state's slow devaluation of the ruble, which could lead to increased demand for import substitutes and a rise of jobs in the manufacturing sector, said Katya Maloyfeyeva, chief economist at Renaissance Capital.

She added that the country's financial reserves -- an asset it did not have during the crisis of 1998 -- would soften the blow of widespread unemployment.

"I think the government is better financially positioned to provide the unemployed with access to social services," she said.