Flash Comment: Latvia - August 18, 2011: Latvian employment up by 3.3% yoy in 2Q 2011

1. Flash comment
Economic commentary by Economic Research Department August 18, 2011
Latvian employment up by 3.3% yoy in 2Q 2011
Labour market indicators, Latvian unemployment rate declined from 16.6% in 1Q 2011 to
% of econ. active 16.2% in 2Q 2011, according to Labour Force Survey’s results
25 69 published by Latvian Central Statistical Bureau. This is a bit slower
20 68 than expected, but the reason for that is rapidly increased
15 67 participation rate (65.7% in 2Q). These are thus positive news; for
10 66
instance, the number of discouraged persons (who lost their hope
to find a job and thus were inactive) started to decrease.
5 65
Meanwhile, in 2Q 2011 Latvian employment grew by impressive
0 64
3.3% in annual terms.
-5 63
-10 Job seekers rate 62 Confidence of households and businesses is improving as well.
-15 Employment, yoy 61 Unemployment expectations continue to decrease, while
Participation rate (rs)
-20 60 employment expectations in industry, retail, service, construction
1Q 06 1Q 07 1Q 08 1Q 09 1Q 10 1Q 11 are rising.
Source: CSBL
Still, improvement in the labour market situation remains slow. In
2Q 2011 there were by 30.6 thousand employed more than a year
Job seekers by duration, ago (including 3 thousand more participants in labour market
thsd persons programs, i.e., temporarily employed). The number of unemployed
decreased by 38.8 thousand to 187 thousand.
250
200 Outlook
150
We still expect employment to grow by 2-2.5% in 2011, although
average unemployment rate is likely to be somewhat higher than
100 15.5% forecast in April. Although economic growth picked up in the
2Q 2011, it is still not sufficiently strong to create enough high-
50 quality new jobs. There are still structural problems that need to be
addressed by policy makers, like long-term/structural
0
unemployment and skills mismatches, rising income inequality,
1Q 05 1Q 06 1Q 07 1Q 08 1Q 09 1Q 10 1Q 11
regional imbalances within the country, etc.
<6M 6-11M >12M Source: CSBL
New job creation in the upcoming years will depend on growth in
export-related industries and entrance of new investors. Given
increased global uncertainty and forecast slowdown in external
demand for Latvian goods and services, job creation is forecast to
be sluggish as well.
Lija Strašuna
Senior Economist
+ 371 6 744 5875
lija.strasuna@swedbank.lv
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