Israel Economy Expected to Shrink 2% as War Sidelines Workers

The Israeli economy is expected to contract 2 percent this quarter, according to a leading research center, with hundreds of thousands of workers displaced by the war with Hamas or called up as reservists.

About 20 percent of the Israeli workforce was absent from the labor market in October, down from 3 percent before the fighting began, according to a report by the Taub Center for Social Policy Studies, a nonpartisan think tank in Israel. .

The rise in unemployment reflects the fact that some 900,000 people were called to fight, stayed home to care for their children because schools had closed, were evacuated from cities near the borders with Lebanon and Gaza, or were unable to work because to physical harm to their families. industries.

Since October, some students have been able to return to school and some displaced Israelis have been able to work remotely. Still, the economic implications of such a large disruption could be significant, especially with no end to the war in sight.

Growth projections for next year are lower than previously estimated, but the ranges vary; Some analysts say the economy could grow only 0.5 percent. The Bank of Israel has given probably the most optimistic projection of 2 percent, citing the faster-than-expected recovery from previous wars and the Covid-19 pandemic.

“The wide range of projections we’re seeing comes from some of the different assumptions about the duration and intensity of the fighting,” said Karnit Flug, vice president of research at the Israel Democracy Institute and a former governor of the Bank. From Israel.

As of Sunday, 191,666 people in Israel had applied for unemployment benefits since the war began on Oct. 7, and the vast majority said they had experienced forced unpaid leave, according to the Taub Center.

Some 360,000 reservists were cleared for duty in October, the largest mobilization since the 1973 Arab-Israeli war, also known as the Yom Kippur War, when 400,000 reservists were called up to fight a surprise attack from Egypt and Syria. The actual number of reservists called up this time was between 200,000 and 300,000, according to an estimate by the Taub Center, of which 139,000 were withdrawn from the labor market.

As a result, many Israelis had to suddenly abandon their lives to go to war, leaving many employers in the lurch. And while the Israeli government has provided some financial assistance to many affected people and businesses, promised additional grants have been slow to arrive. Some reservists are self-employed and say their own businesses are collapsing while they wait.

The Taub Center said up to a fifth of workers at medium and large companies were on reserve duty in October, citing data from Israel’s Central Bureau of Statistics. Those companies, defined as those with at least 100 workers, employ more than half of the Israeli workforce.

Labor shortages have been particularly acute in the tourism, construction and agriculture sectors. The latter two industries rely heavily on Palestinian workers, who have been largely banned from entering Israel since October 7.

With no one to pick fruits and vegetables, many Israelis have volunteered on farms in the center and south of the country.

Isabel Kershner contributed reports.