Hungary’s labour market still flashing strength
The Hungarian labour market showed signs of positive movement in May, with employment rising more than anticipated along with a drop in the unemployment rate to 4.3% from 4.5% in April. This uptick, while promising, is framed as temporary given the ongoing structural issues, as many companies remain engaged in labour hoarding—contradicting any indications of a long-term recovery. Per the full note from ING, the sustainability of this improvement is yet to be validated, particularly as the working-age population continues to decline and the change largely stems from individuals transitioning back into the workforce rather than a significant net job creation. In the context of FX implications, the current labour market dynamics should inform trader sentiment regarding the HUF's resilience against broader eurozone trends.
What the desk is arguing
The Hungarian labour market's recent performance, showing a reduction in the unemployment rate to 4.3% as reported by the Hungarian Central Statistical Office, suggests brief resilience amid ongoing structural challenges. Per the full note from ING, although employment figures exceeded expectations, the desk regards this development as likely transient rather than indicative of a robust labour market recovery.
ING's analysis points to a net increase of around 35,000 employed individuals in May, but this does not offset deeper issues, including the demographic decline in the workforce. The reduction in economically inactive individuals was significant, yet many firms still prefer to hoard labour despite these changes.
Where it sits in our coverage
- J.P. Morgan: 1.10 (Mar26)
- BofA: 1.04 (Mar26)
Given our consensus target of 1.075 for the HUF/USD pair, the desk's perspective on the labour market aligns with J.P. Morgan's bullish stance while diverging from BofA's more cautious outlook at the lower end of consensus. This adds a layer of nuance for traders given potential fluctuations tied to domestic labour market developments.
How other firms see it
J.P. Morgan and other aligned firms maintain a more optimistic view on HUF performance based on the recent labour data, positing that improvements in the employment backdrop could lend strength to the currency. Conversely, BofA, which holds a contrary stance, suggests caution in the wake of underlying structural issues within the labour market that might limit HUF appreciation against the euro.
Future movements in the HUF might correlate with shifts in the EUR/HUF pair, especially reflecting any changes by the European Central Bank in response to regional employment trends. Market participants should keep a close watch on the eurozone's employment statistics, given their potential spillover effects on Hungary's currency position.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Hungary's unemployment rate dropped to 4.3%, reflecting a temporary improvement in the labor market.
- 02Despite positive employment figures, structural issues remain prevalent as firms continue to hoard labor.
- 03The HUF may experience volatility as traders assess these labor market dynamics against broader regional trends.
- 04Consensus forecasts suggest divergence in outlook, with moderate targets from aligned and contrary firms alike.
Market implications
Traders should monitor HUF movements, particularly against the euro, as new labour market data could influence short-term sentiment. The 1.075 level may serve as a critical pivot for the currency in light of current employment trends.
Risks to this view
A significant uptick in unemployment or a downturn in economic activity could invalidate the desk's current outlook, leading to a bearish sentiment on the HUF. Additionally, faster-than-expected labor market deterioration could place downward pressure on the currency.
Older quick take Quick take 14:21 Hungary Hungary’s labour market still flashing strength Employment rose more than expected in May, but we see this as a temporary uptick rather than a structural shift, with many firms still hoarding labour The Hungarian labour market was strong in May, but underlying structural issues remain unresolved 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 4.3% Unemployment rate (Mar–May) ING estimate 4.4% / Previous 4.5% The Hungarian unemployment rate for May came in lower than expected, according to the latest labour market statistics from the Hungarian Central Statistical Office (HCSO). Examining the monthly model estimate, we can see that the unemployment rate fell to 4.3% in May 2026 (from 4.5% in April). Meanwhile, the official three-month moving average survey also declined, falling to 4.3%.
These figures show a significant positive shift in the Hungarian labour market. The number of unemployed people fell below 210,000 in May, which is the lowest figure recorded this year and lower than last year's average. However, we are currently looking at only a single data point, so the sustainability of this shift remains to be seen.
Examining the details, the monthly data reveal that although the working-age population decreased by around 5,000 people month-on-month, the number of economically inactive individuals fell by a more substantial 33,000. This means that demographic decline contributed moderately to the decrease in inactivity, while 28,000 people returned to active status. Furthermore, the number of employed people grew faster than the number of labour market participants.
In other words, around 7,000 unemployed people found new jobs. Thus, overall, the labour market saw an increase of around 35,000 people in May on a monthly basis. Changes in the labour market since mid-2022 ('000, 3-m moving avg) Source: HCSO, ING "> Source: HCSO, ING This change means that the decline in employment in April has largely been offset, and the indicator has risen to its highest level in seven months.
The decline in labour demand seen last month was therefore temporary, which is interesting given that, unlike the consumer confidence index, the business confidence index has not improved dramatically. The June business confidence index was also in line with the April–May average. The latest data show that, because of demographics, the working-age population has already fallen by 165,000 by May compared to the level seen in June 2022, when the labour market peaked in Hungary.
In general, the Hungarian labour market has remained tight. The number of job openings has not declined further, and employment statistics also indicate an overall improvement based on the average over the past three months. The main question is whether this momentum can be sustained.
While the economic upturn in the first quarter was partly due to one-off factors, second-quarter data – though still limited – already seem to signal a loss of momentum. The positive labour market developments we have seen so far may therefore prove to be only temporary. However, the easing of geopolitical risks and greater clarity regarding domestic economic policy changes could help to boost business confidence and prevent a negative turnaround in the labour market.
Historical trends in the Hungarian labour market (%) Source: HCSO, ING "> Source: HCSO, ING Looking ahead, we do not expect any significant changes to the supply side of the labour market. With no demographic shift on the horizon, a significant proportion of companies are likely to continue maintaining a labour reserve, keeping the labour market artificially tight. As the end of the year approaches, the issue of next year's wages is also becoming increasingly pressing.
The three-year minimum wage agreement, stepping into its last year in 2027, will certainly need revising, and the expected overhaul of the personal income tax system may also create a new situation. The sooner companies gain clarity on these factors, the sooner new trends in the labour market will begin to emerge. In light of the latest data, we are maintaining our labour market forecast for this year, which projects an average unemployment rate of around 4.5%.
Wage growth Unemployment rate Unemployment Labour market Hungary Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Older quick take
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