Flash comment: Latvia - August 14, 2012:Annual employment growth at 2.2% in the second quarter of 2012

1. Flash comment: Latvia
Economic commentary by Economic Research Department August 14, 2012
Annual employment growth at 2.2% in the second quarter of 2012
Labour market indicators, The unemployment rate declined to 16.1% in the second quarter of
% of 15-74 population 2012 from 16.3% a quarter ago (17.1% a year ago), according to
20 70 Labour force survey data by the Central Statistical Bureau of
Latvia.
65 Such a relatively small drop in unemployment was due to surging
15
participation (activity) rate – to 66.5% from 65.1% a quarter ago
60 (64.9% a year ago). Previously inactive persons become more
10
optimistic with respect to available job opportunities – they start
55 searching for a job and many of them also find one. The largest
increase in activity is observed in 15-24 and 55-64 age groups.
5 50 With economic growth luring back people to labour market,
1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12
Unemployment rate, % of econ.active
employment continued to grow strongly. Annual employment
Participation rate (rs) growth in the second quarter was 2.2% or 19 thousand persons,
Employment rate (rs) Source: CSBL
but net of active labour market programs employment rose by 4.6%
implying 38 thousand new jobs were created during the year.
Unemployed by duration, Yet, 54% of unemployed cannot find a job for more than a year
thsd persons
already. A big share of long-term unemployed (most of them for
200 10 structural reasons) makes it more difficult to rapidly diminish
unemployment. It might also create upward wage pressures (if the
160 8
currently unemployed do not posses knowledge and skills that are
120 6 demanded by employers) even with double-digit unemployment
rate. So far these wage pressures have been rather muted though,
80 4 as vacancy rate has stayed constant for more than a year already
despite falling unemployment.
40 2
0 0 Outlook
2011 2012
>12M Lost hope finding a job, % Job creation is expected to continue, although slower in the second
6-11M of total inactive(rs) half of the year. We also expect the unemployment rate to continue
<6M
Source: CSBL falling. Although employment expectations in manufacturing have
diminished, in services sectors they continue to rise slowly.
Employment expectations,
Companies are still cautious to employ more people, as future
points
economic developments in the euro zone remain very uncertain.
40
20
0
Lija Strašuna
Senior Economist
-20
+ 371 6 744 5875
-40 lija.strasuna@swedbank.lv
-60
-80
2007 2008 2009 2010 2011 2012
Construction Manufacturing
Services Retail
Source: DG ECFIN
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