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Russian labor shortage bites economy in November, unemployment at record low

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MOSCOW — Most of Russia’s key economic indicators fell in November as the unemployment rate dropped to a record low of 3.7%, data released on Wednesday showed, a sign that a labor shortage officials have flagged is hurting the country’s economic prospects.

As well as low unemployment, the data published by the Rosstat federal statistics service showed lower industrial production and a sharp drop in retail sales.

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Top government and central bank officials have highlighted concerns about the economic impact of a tight labor market since President Vladimir Putin ordered a “partial mobilization” of mostly working-age men in late September for what Russia calls a “special military operation” in Ukraine.

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Hundreds of thousands of Russians fled the country when mobilization was announced in September, while around 300,000 were drafted into the army.

“We are very much concerned, of course, about the labor market. Because in fact (labor) is scarce at the moment, and this is a constraint,” Economy Minister Maxim Reshetnikov said earlier this month.

And on Dec. 16, the central bank said many industries were seeing increasing labor shortages “amid the effects of the partial mobilization.”

Wednesday’s data showed official unemployment fell to 3.7% in November, down from 3.9% in October. Industrial production fell 1.8% in November. Retail sales, a key gauge of consumer demand, slumped 7.9% year-on-year.

Rosstat also revised downwards retail sales readings for July, August and October.

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Real wages, which are adjusted for inflation, rose 0.4% year-on-year in October, the first positive reading since March, but higher wages when combined with the labor crunch could feed into inflation.

Consumer prices have risen every week for around three months, Rosstat said, with year-to-date inflation running at 12.01%.

Russia’s export-dependent economy has withstood the impact of sweeping Western sanctions better than initially expected, but subdued consumer demand, a narrowing current account surplus and the prospect of lower export revenues as an oil price cap comes in complicate the outlook for 2023. (Reporting by Alexander Marrow and Darya Korsunskaya; Editing by Frank Jack Daniel)

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