As a result of liberalization of the Russian economy, a new phe-nomenon for the country emerged at the beginning of the 1990s: official unemployment. However, contrary to widespread predictions, it did not become a dominant factor in the labor market and its scale was not catastrophic. During the reform years, the total drop in production was almost 50 percent, but the maximum decline in employment was limited to 18 percent, while the unemployment rate did not exceed 13-14 percent at any time during this period. By 2003 it had fallen to less than 8 percent of the labor force. This is because the labor market's initial adjustment occurred mainly through decreased real wages, rather than through reduced numbers of employees. This was largely due to the Central Bank of Russia's expansionist monetary policies which brought about hyperinflation at the beginning of the 1990s. This, in turn, led to a reduction in real household incomes, even while they were nominally rising. In addition, one of the most important trends in the labor market in recent years was a decline in the population's economic activity, or the departure of working-age people from the labor market. According to Goskomstat of Russia, in 1992-2001 the number of economically inactive working-age people rose by 6.6 million, while the economic activity of the population as a whole declined by more than 6 percent, which is equivalent to 7.7 million people leaving the labor market.
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