UPDATE 1-Slovak unemployment rate hits record low in August

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By Martin Dokoupil

BRATISLAVA, Sept 18 (Reuters) - Slovakia's booming economy helped drive its unemployment rate to record lows last month, Labour Office data showed on Tuesday, but the jobless statistics are expected to worsen temporarily this month.

The Labour Office said the jobless rate fell to 8.19 percent in August from 8.30 percent in July. The unemployment rate, calculated from people without a job but able to start working shortly, was 9.85 percent in August 2006.

The Labour Office also confirmed a deepening shortage of skilled workers in Slovakia, a trend seen in all post-communist central European countries trying to catch up with more developed European Union members.

"We have signals from labour offices that the unemployment rate could rise slightly in September due to inflow of graduates to the (job) market," Labour Office Director Jan Sihelsky told journalists.

"But we expect a decline in the following months because of investors' demand for workforce."

The Slovak jobless rate has fallen steadily from around 20 percent four years ago after the former centre-right government, which lost power in the 2006 election, cracked down on abuse of the welfare system.

New foreign direct investment projects, such as car assembly plants by French PSA Peugeot Citroen and South Korea's Kia Motors , have also created new jobs and cut the unemployment rate.

Foreign investors, flocking to Slovakia due to its flat 19-percent tax rate and cheaper workforce than in the West or its central European neighbours, have also helped drive Slovak economic growth to 9.4 percent in the second quarter of 2007.

WORKERS SHORTAGE

But new projects have also drained Slovakia's job market - around half of registered unemployed Slovaks are low-skilled and out of work for a long time - forcing investors to import workers from younger EU members Romania and Bulgaria.

"Core investors who come to Slovakia have more difficulties to find qualified labour on the local market," Sihelsky said.

The office expects the Slovak car industry, the key engine of economic growth, to create 45,000 new jobs in 2007-2010.

It said the expanding electronics industry, dominated by Samsung Electronics , will need around 6,000 workers a year, while the construction sector is now missing 5,000 people.

"Lacking labour force is not only a Slovak problem, but a problem in the whole of central Europe, including Czech Republic or Poland," said Miroslav Plojhar, economist at JP Morgan in London.

"It seems economies are approaching their work force limits. New sources of growth will have to come and this will be painful," he said.

Analysts expect a tightening labour market to drive wages up in central Europe, which could boost inflation.

Keywords: SLOVAKIA JOBLESS/