Russian unemployment falls and wages continue to rise; real incomes contracted in August-September

Using the methodology of the International Labour Organization (ILO), Russia’s unemployment rate continued to decline this year, falling to just 4.5 % in September. The national unemployment rate in September 2017 was 5 %. The unemployment rate in both Moscow and St. Petersburg was below 2 %.

The average nominal monthly wage in September was up by 11 % y-o-y to 42,200 rubles (530 euros). The decline in unemployment and emergence of labour shortages in some growth centres have supported strong wage growth, but the largest single driver continued to be the large wage hikes for public service workers. These hikes derive from a decree given by Putin after he was inaugurated as president in May 2012. The last of the decreed wage hikes in education, healthcare and culture sectors were implemented in early 2018, before the end of that six-year term in office.

In the first half, the rise in wages was sufficient to make up for the lower growth in other income streams (pensions, wealth transfers, capital income and entrepreneur income). After four years of contraction, real disposable household incomes increased slightly in the first half of this year relative to the same period last year. The slight slowdown in the pace of wage increases from January-March brought real income growth to a halt. Real incomes in the third quarter were unchanged from a year earlier. The weak trend in real incomes partly accounts for the low growth in retail sales. The average nominal wage in September was up 11 % y-o-y, while the volume of retail sales grew by only 2.2 % y-o-y.