Turkish statistics office released December 2016 jobs report which suggested that the Unemployment Rate at 12.7% hit a 7-year high as well as a seasonally adjusted figure at 12%. More importantly, the number of unemployed people stood at 3.87 million which was the higher figure ever recorded in that regard.

When the agriculture sector excluded, the adjusted unemployment rate also climbed considerably to 14.3% which was a result of the weaker economic activity and deteriorating expectations. Last year also marked a lean period for the youth of the nation as the youth unemployment rate revealed that almost one fourth of young people were without a job.

There are some important points to gleam from the latest jobs reports in many aspects to make an inference about the worsening economy.

First, we feel the need to put some emphasis on women participation in Labor Market as we consider it as one of the most challenging issued ahead of Turkish economy. The contribution of Turkey’s female workforce to the economy remained low given the participation rate of 32% which is among the lowest among the OECD countries. That said, the unemployment rate for the women with higher education jumped remarkably to 19.1% from 15.3% y/y in 2016. This, in our view, proves that women jobs are under bigger threat with economic conditions getting severe. The other key finding is that this is locking some important part of the country’s potential as women are prevented from adding value economically, culturally, and socially.

Second, when the non-agricultural jobs broken down into industries, we observe that the share of industry jobs dropped to 24.2% in 2016 from 25.2% in 2015 which already had been on a declining trend since 2005 when it provided 29% of the total non-agricultural jobs. At this stage, we refer to our previous research where we analyze the sectoral breakdown of the jobs and their contribution to the output generation (see Service Jobs: Structural Headwind?). Provided that the possibility of a sea-change here is low, we expect the economy to perform below its historical standards.

Thirdly, and finally, we believe that the current conditions in the labor market would potentially lead a major deterioration in asset quality of the banks. Consumers being destitute of regular income does not bode well particularly in Turkey given the heavy concentration on retail lending of the financial institutions. NPL ratios had already been on the upward trend until late last year and started to show some signs of improvement. However, to our thinking, we may see the impact of the weaker labor market on loan payment as of Q2 2017.