Russia's headline labour market data detracts from a bleaker reality

Russia's unemployment rate came out at a yearly low of 5.2%, suggesting hiring was more intensive in September due a slight pick-up in production. However, it is too soon to jump to conclusions, given: 1) the headline indicator is distorted as it includes Crimea and Sevastopol, whereas adjusted to exclude the latter, the mainland unemployment rate did not change significantly and the number of unemployed continued to grow on a monthly basis; 2) adjusted for seasonal effects, the unemployment rate actually increased to 5.5%, i.e. close to the existing trend; and 3) the market still fails to reflect any inflation pass-through on wages. 

The nominal wage bill grew only 4.5% yoy, which was well below the previous three-month average rate (+5.2% yoy). Hence, in real terms, wages contracted 9.7% yoy confirming a deterioration in the trend after revision of previous figures (August saw an uplift to -9.0% yoy). That said, the likelihood of a pick-up in wages by end-2015 is marginal and mainly tied to a projected deceleration in inflation to within a range of 11.6-12.2% yoy in December.