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Russia’s jobless rate is at a record low due to a labor crunch — but that’s only part of the story.
A wave of “hidden unemployment” is building as companies slash hours and quietly cut staff. Russian President Vladimir Putin acknowledged the trend on Tuesday.
“Hidden unemployment is growing, meaning that some workers are in the so-called downtime, employed part-time, or are at risk of being laid off,” Putin said at a meeting on economic issues. The term “downtime” refers to periods when employees remain on payroll but are not working, often due to a slowdown in production.
Official figures show the trend accelerating: 98,000 people were classified as falling into the three categories at the start of 2025. That number climbed to 153,000 by late June, and hit 199,000 as of August 8 — roughly double the number at the start of the year.
Last month, Avtovaz, the maker of Russia’s best-selling car brand, said it may move to a four-day workweek after sales slumped this year. The automaker employs over 30,000 people.
Other companies in transportation and heavy industry have made similar cuts, according to Russian media reports.
In July, officials in the Sverdlovsk region acknowledged “changes in the economy” that are prompting some enterprises to reduce head count or move workers to part-time schedules.
Retail is also under strain. A July report from Russia’s central bank said the number of people employed in the wholesale and retail sector has fallen over the year, largely due to the mass closures of car dealerships. The same report found that the share of companies planning to cut staff jumped from 6.9% in January to 11.5% in June.
While demand for workers is weakening in some sectors, Russia is also facing a long-term demographic crisis that threatens to shrink its labor force even further. In 2024, births fell to their lowest level since 1999.
The war in Ukraine is further straining the labor force, as battlefield losses and a brain drain sap the country’s supply of young, skilled workers.
Beyond jobs, other warning signs emerge
The Center for Macroeconomic Analysis and Short-Term Forecasting, a think tank aligned with the Russian government, has warned of “not the most favorable structural shift” in investment, with investments moving away from Russia’s civilian private sector.
That’s fueling growth in some state-backed industries while problems mount elsewhere.
Even as the jobless rate stays low at 2.2%, the number of registered unemployed has risen from 274,000 in January to 300,000 in early August.
Putin said the government needs to “sense ongoing trends and respond” to prevent “excessive cooling of the economy.”
Putin’s comments came ahead of a meeting with President Donald Trump in Alaska to discuss the Ukraine war, with Russia’s sanctions-hit economy grappling with mounting pressure. This will be the first face-to-face encounter between the two leaders in years.
Russia’s GDP grew just 1.1% in the second quarter, slowing from 1.4% in the first quarter and sharply down from 4% a year earlier. Oil and gas revenues — a crucial source of the Kremlin’s war funding — have fallen amid weak crude prices.
Meanwhile, frequent internet outages tied to security measures against Ukrainian drone strikes are disrupting the digital economy, making it harder for people to make electronic payments and use apps.
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