TURKEY Q3 Employment Analysis: 8.5% Jobless Rate Masks Deepening Labor Underutilization
yasli ekonomisi
Turkey’s official Q3 2025 unemployment rate held steady at 8.5%, but an analysis of the data reveals stagnation in job creation (only 65k new jobs) and severe structural issues, including soaring levels of labor underutilization and a persistent gender gap, highlighting the real cost of the restrictive monetary policy.
The Turkish Statistical Institute (TUIK) has released its Q3 2025 Labor Force Survey, offering a critical look at how the Turkish labor market is reacting to the central bank’s aggressive monetary tightening cycle aimed at combating persistent inflation.
The headline figures suggest a market maintaining its equilibrium, yet a deeper dive into the data reveals significant stagnation and a widening gap between official statistics and the real-world utilization of the workforce.
Headline Stability Versus Underlying Stagnation
The official data shows relative stability in the main indicators compared to the previous quarter:
| Indicator | Q3 2025 Figure | Q-on-Q Change |
|---|---|---|
| Seasonally Adjusted Unemployment Rate | 8.5% | Unchanged |
| Number of Unemployed | 3.01 million people | Decreased by 26,000 |
| Seasonally Adjusted Employment Rate | 49.0% | Unchanged |
| Number of Employed | 32.558 million people | Increased by 65,000 |
Analysis: While the 8.5% official unemployment rate successfully remained in single digits, the rate of new job creation is concerning. An increase of just 65,000 employed persons in a dynamic economy like Turkey’s—a number barely sufficient to absorb the new entrants into the labor force—signals a significant loss of momentum.
This sluggish increase confirms that the monetary policy’s goal of cooling aggregate demand is working. However, the cost is evident in the private sector’s unwillingness to commit to new hires, leading to an effective stagnation in the overall employment rate (49.0%).
The True Cost: Youth and Underemployment Risks
The greatest systemic risk is revealed when looking beyond the official unemployment rate, which only counts those actively seeking work. The real stress is captured by broader indicators, particularly those measuring the quality and capacity of work.
The persistent high rate of Youth Unemployment (15-24 age group), which is estimated to be around 17.5%, remains a structural hurdle, signaling that a large portion of the nation’s highly educated workforce cannot find stable, career-track positions. This fuels social discontent and accelerates the “brain drain” phenomenon.
Crucially, the metric of Time-Related Underemployment (the share of workers who work fewer hours than desired but are counted as employed) is also estimated to be high (around 5.5%). This suggests that rather than facing layoffs, firms are resorting to cutting hours to manage costs. This time-related underemployment acts as a leading indicator for future layoffs, showing that corporate profitability and capacity utilization are already under severe strain.
When combining all those officially unemployed, discouraged workers, time-related underemployed, and those in insufficient jobs, the Broadly Defined Unemployment Rate (Labor Underutilization) is estimated to be hovering around 24.5%. This stark gap—a 16-point difference from the headline 8.5%—shows that one in four potential workers remains idle or severely underutilized, revealing the true level of slack in the Turkish economy.
The Deep Gender Divide: A Structural Barrier
The report highlights the enduring structural problem in the gender breakdown of the labor force, a significant barrier to Turkey realizing its full economic potential:
| Indicator | Male | Female | Gap (Percentage Points) |
|---|---|---|---|
| Unemployment Rate | 7.0% | 11.2% | 4.2 |
| Employment Rate | 66.2% | 32.1% | 34.1 |
Analysis: The female unemployment rate (11.2%) is substantially higher than the male rate (7.0%). More critically, the 34.1-point disparity in the employment rate is striking. Only 32.1% of working-age women are formally employed, compared to 66.2% of men.
In economic slowdowns, this gap typically widens as women are disproportionately pushed out of the labor force due to economic pressures, lack of affordable childcare, and the country’s social structures. Bridging this enormous gender gap remains the single most important structural reform for boosting long-term sustainable growth and productivity.
Policy Implications for the Central Bank
The Q3 employment data provides mixed, but overall constructive, signals for the Central Bank (TCMB) in its fight against inflation:
- Monetary Policy Effectiveness: The stagnant employment figures (65k increase) confirm that the TCMB’s high interest rates are effectively dampening demand. A cooling labor market is a necessary precondition for the sustainable reduction of inflation.
- Focus on Quality over Quantity: However, the high levels of underemployment and youth joblessness mean that policy needs to stabilize the quality of jobs, not just the quantity. While the TCMB focuses on inflation, the government must simultaneously introduce fiscal and structural policies to alleviate the social costs associated with tight monetary conditions.
Without targeted interventions—such as reducing informal employment (estimated near 30.0%) and implementing active labor market policies for the youth—the “soft landing” currently desired by policymakers risks turning into a period of persistent low-quality job creation, leaving a legacy of skill underutilization and long-term economic frustration.
