Macro and Politics

* May Employment figures will be released @ 10:00 local time. The seasonally adjusted unemployment rate edged up slightly from 8.1% to 8.2% in April, while the broad underutilization rate — which we closely monitor as a more comprehensive indicator of labor market conditions, and which includes time-related underemployment, potential labor force and unemployment — declined from 31.3% to 30.1% over the same period. A closer look at the subcomponents shows that the combined rate of time-related underemployment and unemployment fell from 20.8% to 19.3%, whereas the combined rate of unemployment and potential labor force increased modestly from 20.3% to 20.5%. Although the broad underutilization rate posted a limited improvement in April, the fact that broad unemployment continues to hover around the 30% threshold suggests that labor market fragilities remain elevated. The relatively subdued headline unemployment rate indicates that the narrow definition of unemployment fails to fully capture the underlying weakness in labor market conditions, while the persistently high level of potential labor force points to significant remaining slack in the labor market. Taken together, we believe labor market conditions remain materially weaker than what the official unemployment rate alone would imply.

* TURKSTAT will release May foreign trade figures @ 10:00 local time. Preliminary May data released by the Trade Ministry point to an improvement in the foreign trade balance relative to April. According to the preliminary figures, exports declined by 9.3% year-on-year to USD22.5bn in May, while imports contracted by 10.7% annually, reaching USD28.1bn. Gold exports stood at USD378mn during the month, whereas gold imports posted only a limited decline to USD941mn from USD1.2bn recorded in April. Based on the preliminary data, the monthly foreign trade deficit narrowed from USD8.5bn in April to USD5.6bn in May, while the 12-month rolling deficit eased to USD93.5bn from USD94.5bn in the previous month.