Flash comment: Latvia - May 22, 2012: Annual employment growth at 2.6% in the first quarter of 2012

1. Flash comment: Latvia
Economic commentary by Economic Research Department May 22, 2012
Annual employment growth at 2.6% in the first quarter of 2012
Labour market indicators, The unemployment rate had risen to 16.3% in the first quarter of
% of econ. active 2012 from 15% a quarter ago, according to Labour force survey
20 73 data by Central Statistical Bureau of Latvia that were adjusted
according to 2011 Population census results.
16 66 This increase is considered to be temporary. First, it is partly
explained by seasonal factors (similar trends were observed in
12 59 registered unemployment). Second, the number of persons
participating in active labour market programs has declined from
8 52 17.1 thousand a quarter ago to 6.4 thousand. This explained about
a half of a drop in employment.
4 45 In addition, the participation rate rose from 64.7% in the fourth
1Q 11 2Q 11 3Q 11 4Q 11 1Q 12
Unemployment rate
quarter of 2011 to 65.1% in the first quarter this year. It is likely that
Participation rate (rs) previously inactive persons have started to search for a job (or
Employment rate (rs) Source: CSBL
found one), which is certainly a positive trend. For instance, the
number of inactive persons that lost hope finding a job has
Unemployed by duration, continued to decline (7% of total number of inactive persons in the
thsd persons first quarter).
200 10 On the positive side, the unemployment rate declined from 17.6% a
year ago. Annual employment growth was 2.6% or 22 thousand
160 8
persons, but net of active labour market programs employment
120 6 rose by 4.6% or 38 thousand persons. This is then new job creation
in the public and the private sector. In the first quarter of 2012 there
80 4 were 858 thousand employed.
40 2
Outlook
0 0
Labour market situation is expected to continue improving,
1Q 11 2Q 11 3Q 11 4Q 11 1Q 12
Lost hope finding a job, %
although slowly. Companies are still cautious to employ more
>12M
6-11M of total inactive(rs) people and raising wages, as future economic developments in the
<6M
Source: CSBL euro zone remain very uncertain. Still, the unemployment rate most
likely will start diminishing again in the second quarter of 2012.
Employment expectations,
points Despite positive tendencies in the labour market, problems remain
40 as well. The unemployment rate is still very high, and nearly 52%
are long-term unemployed (more than a year). For these persons it
20
is becoming increasingly difficult to find a job, since their skills and
0 knowledge is deteriorating without practice. The participation rate in
-20 Latvia is significantly lower than in Estonia and Lithuania (where
retirement age is gradually being raised, while in Latvia it is
-40
planned only starting from 2014). If no reforms are implemented in
-60 tax, education, regional and social policies, skill and regional
-80 mismatches will increase.
2007 2008 2009 2010 2011 2012
Lija Strašuna
Construction Manufacturing
Services Retail Senior Economist
Source: DG ECFIN + 371 6 744 5875
lija.strasuna@swedbank.lv
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