January's rise in unemployment has divided economic analysts and government officials, with analysts forecasting a bounce-back as early as March, while the Labor and Social Affairs Ministry took a more cautious view, announcing plans Feb. 13 to further limit the labor market to some foreigners.

The unemployment rate in the Czech Republic rose to 9.1 percent in January from 8.6 percent in December, with the number of job seekers increasing 25,638 month on month to 534,089, the ministry reported Feb. 8.

Unemployment rates in the Czech Republic follow a cyclical pattern, rising in December and January, sometimes continuing into February and March, and then gradually declining in the months that follow, macroeconomic analyst at Raiffeisenbank Václav Franče said.  

The unemployment figures released by the Labor and Social Affairs Ministry have not been seasonally adjusted for construction and agriculture layoffs during winter, Franče said.

Unemployment is expected to decline starting in March, he added.

 "There will be a slight increase in unemployment in June and July because that's when new students enter the labor market; this is a seasonal pattern, and then it will drop again in December," he said.

However, government orders to stop issuing work permits to non-EU foreigners with low qualifications, as of July suggests pre-emptive caution toward potentially rising unemployment. Existing work permits will now be extended a maximum of six months and only in the absence of qualified EU workers. Meanwhile non-EU foreigners who are temporarily sent to the Czech Republic on an agreement signed before Jan. 1 of this year should be asked to provide proof their professional qualification is recognized, the ministry said.

Employment offices registered 517,723 job seekers ready to start work immediately at the end of January, which was a growth of 25,765 compared with the end of December but still a decrease of 37,410 from January 2011.

Month-on-month growth in unemployment was registered in all 77 districts of the Czech Republic, with the Prachatice district in south Bohemia recording the most rapid growth in unemployment, ending at 12.7 percent for the month. The highest unemployment figure was recorded in the Jeseník district of north Moravia, where it reached 17.8 percent, while the lowest jobless rate of 3.4 percent was recorded in Prague-East.

Fewer job vacancies were announced in January than the previous month, but the longer-term picture looks more promising. At the end of January, 34,471 job vacancies were available, a decrease of 1,313 compared with December but an increase of 3,078 compared with January last year. A total of 12,639 vacancies were newly opened during January, and 13,952 vacancies were filled or canceled. Each vacancy received an average of 15.5 applications, with the number of applicants per vacancy highest in the Třebíč district in south Moravia, where it reached more than 60.

Despite job seekers having more openings to choose from than a year ago, many companies are worried about economic growth during this year and the impact of the recession in the eurozone, said Jiří Šimek, an analyst from Citfin. "Employers are apprehensive to hire new staff due to the pessimistic outlook for this year," he said.

The forecast for a tough 2012 has also meant layoffs as well as hiring freezes, Franče said, adding redundancies have hit the banking sector in particular. "We expect the Czech economy will be in recession in 2012, and the increase in unemployment will be a result of economic conditions," he said.

Slow economic growth in 2012 will mean no opportunities for improving conditions on the labor market, Šimek said. However, in the spring, there will be a positive seasonal factor, which should bring a drop in unemployment with the start of seasonal work.

Raiffeisenbank is forecasting a 9.0 percent unemployment rate for 2012, 9.2 percent for 2013 and then a gradual decline in unemployment from thereon, Franče said.