Israel's unemployment rate fell to 3.1% in August 2023, the Central Bureau of Statistics reports - the lowest rate since the current method of measuring unemployment was introduced in 2012. The unemployment rate fell from 3.4% in July and it seems as if Israel's job market is as tight as ever.

The problem with a tight job market is that it causes upward pressure on wages and fuels inflation. Bank of Israel Governor Prof. Amir Yaron has stressed this situation and called for some loosening in the job market to bring inflation down to the 3% upper limit of the annual target range.

Mizrahi Tefahot Bank chief economist Ronen Menachem told "Globes," "The drop in the unemployment rate (not seasonably adjusted) from 3.4% to 3.1% further tightens the job market," Menachem stressed that the market is in a state of full employment for all intents and purposes and this result is no less influential than the higher than expected rise in the Consumer Price Index (CPI) in August.

Menachem explained that other elements in the market have also increased, such as the employment rate, which adds to the high level of activity in the economy. "The participation rate in the civilian labor force has not fallen, so there is clear optimism regarding the chance of finding a job, along with a high absorption capacity of the employed, who are still faced with a respectable amount of vacant positions," concluded Menachem.

The salary pressures in the economy can be seen from month to month in the Central Bureau of Statistics data. The last figure, which was published in early September, showed that the salaries in July rose by about 6% year-on- year.

The figures published today are added to the increase in the August CPI announced last Friday, which was higher than expected at 0.5%, pushing annual inflation up to 4.1%. This raises even more the fear that in the Bank of Israel's next interest rate decision in October, the interest rate will be hiked to 5%.