The unemployment rate in Turkey rose by 1.2 percentage points y/y to 11.3% while the non-farm unemployment rate climbed to 13.7%. This August job report marked another step in deceleration pace of the economy.
Partly due to the purge following the coup attempt and struggling tourism sector, Turkey lost 614K non-agriculture job in the three-month period ended in August of which 356K came from services. In seasonally adjusted terms, total decrease was 219K (-162K from manufacturing, -113K from construction, and interesting +55K services). The report build a supportive case for a slowdown in the economy to the hilt during the 3Q.
The rising unemployment is likely to influence asset quality in the bank through its pressure on retail loans and credit cards. Traditionally, an unemployment rate above 12% is alarming and potentially would lead a major deterioration. Since the official figures still remain below that threshold, we can comfortably say it is groundless to be pessimistic for the time being, however, we recommend investors to keep an eye on upcoming job reports.