Hungarian labour market’s positive momentum fades
The desk views the fading positive momentum in the Hungarian labor market as a critical signal for macroeconomic stability, while the uptick in unemployment reflects underlying pressures on wages and labor participation. As noted in the recent commentary from ING, the unemployment rate has risen slightly to 4.5%, suggesting that last month's positive trends were likely transitory. This situation, characterized by a tight labor market coupled with rising wages, could hinder the Hungarian economy's recovery, with implications for the forint in the FX space.
What the desk is arguing
The deterioration in Hungary's labor market, as highlighted by an increase in the unemployment rate, suggests that previous optimism may be unwarranted. Per the full note from ING, the labor market is grappling with a tightening workforce and rising wage pressures, leading to a monthly unemployment increase from 4.3% to 4.5% as of June.
The report indicates that while overall employment levels among women have risen, their unemployment has also increased, indicating that many are returning to the job market but struggling to secure positions. This duality in the labor market challenge raises concerns that the anticipated recovery may be stalling, affecting Hungary's broader economic health and possibly impacting monetary policy decisions.
Where it sits in our coverage
Currently, our consensus target for the EUR/HUF pair is set at 1.075, within a range of 1.04 to 1.12. Notable targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This desk's perspective diverges from bofa, which anticipates a lower target, while aligning with jpmorgan's higher expectation, positioned at the upper end of the range.
How other firms see it
Aligned with our view, jpmorgan projects potential strengthening of the forint based on favorable wage adjustments, while bofa offers a contrary stance expecting weakness influenced by labor market challenges.
The trajectory of the EUR/HUF could also reflect sentiment surrounding the European Central Bank's policies and its implications on regional currencies following the Labor data.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Hungary's unemployment rises to 4.5%, signaling labor market distress.
- 02Rising wages amid a declining workforce may strain economic recovery.
- 03Economic sentiment could influence the Hungarian forint's performance.
- 04Mixed employment trends highlight deeper issues in labor participation.
Market implications
Traders should closely monitor the EUR/HUF pair as labor market data unfolds, particularly looking for levels at or around the psychological 1.075 mark. Any deviations in this regard may signal a broader risk-off sentiment towards Hungary's economic outlook.
Risks to this view
A significant recalibration of wage growth or unexpected labor force participation improvements could reverse current trends, invalidating the desk's outlook. Additionally, shifts in European Central Bank policy may drive the forint's trajectory unexpectedly.
Older quick take Quick take Published 10:28 Hungary Hungarian labour market’s positive momentum fades After the pleasant surprise last month, Hungary's June data showed a correction back to the original story: a tight labour market pressured by rising wages and a declining workforce pool. Even considerable optimism won't be enough to change the actual trends in the labour market The Hungarian labour market is under pressure again, and there appears to be no quick fix on the horizon Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Peter Virovacz Chief Economist, Hungary Zoltán Homolya Economic research trainee 4.5% Unemployment rate (Apr-Jun) ING estimate 4.3%/ Previous 4.3% Hungary's unemployment rate increased slightly in June, according to the latest labour market statistics from the Hungarian Central Statistical Office (HCSO). The monthly model estimate puts the rate at 4.4%.
Meanwhile, the official three-month moving average survey also increased, once again reaching a rate of 4.5%. Based on these two indicators, it can be concluded that the positive shift seen last month was temporary. The number of unemployed people stood at around 215,000-220,000 in June, which is in line with last year's annual average.
A closer look at the details reveals a stark contrast in the monthly data. While the unemployment rate for men has been steadily declining since the beginning of the year, there has been significant fluctuation for women, with the rate jumping by 0.3ppt month-on-month in June. This has occurred even as employment among women rose.
The solution lies in a significant increase in labour force participation. The number of economically active women has reached a peak not seen since October 2025, meaning that a large number have returned to the labour market as jobseekers but have not managed to find employment quickly, in turn increasing the number of unemployed individuals. In contrast, among men, the number of employed individuals fell, as has the number of inactive individuals, suggesting a significant outflow from the labour market, presumably due to retirement.
When examining both men and women, we observed minimal changes within the margin of error in labour market statistics for the total population. Changes in the labour market since mid-2022 ('000, 3-m moving avg) Source: HCSO, ING "> Source: HCSO, ING Overall, the decline in the working-age population continued (by 5.2k MoM), with approximately 3,000 people disappearing from the active workforce and the rest dropping out of the inactive pool. Alongside a decrease in employment of nearly 8,000, the number of unemployed people increased by 5,000 MoM.
According to the latest data, as a result of the population decline, the working-age population is now 170,000 smaller than in mid-2022, when the Hungarian labour market was at its peak. The labour market remains tight, as indicated by the ratios. The positive momentum observed in May proved to be only temporary, as we suspected last month.
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