The unemployment rate down to 9.8% in 2Q 2015
- The unemployment rate down to 9.8% in 2Q 2015, both due to job creation and negative demographic trends
- Employment grew by 1% YoY, and the employment rate rose to 60.9%
- More scarce labour resources motivate businesses to invest in equipment and digital solutions
According to Labour force survey (LFS) data by Central Statistical Bureau of Latvia (CSBL), the unemployment rate fell to 9.8% in the second quarter of 2015 (10.7% a year ago). This was due to some job creation and rising activity rate, the latter partly owing to negative demographic trends. For instance, falling number of pupils and students increases the participation rate (since youngsters are inactive in the labour force while studying). The number of non-working pensioners is also falling, partly explained by gradually increasing pension age.
Employment grew by 1% in annual terms in the second quarter, and the employment rate rose to 60.9%, which is higher than in 2005-2006. The participation rate increased to 67.5%; 2Q 2008 was the only time when such high activity level was observed (i.e., just before the crisis). Labour supply is falling and businesses are adjusting to that. There is still potential to raise participation rates further, but more scarce labour is also causing pressure on wages. Businesses respond with investments into machinery and equipment (including different digital solutions) that requires fewer employees. This can very well be seen in manufacturing, where employment is falling for the second year now. Falling employment in domestic trade can also be partly due to that. Overall, employment growth is mostly observed in non-exporting sectors, but also in agriculture and transport. The latter looks a bit weird, given the negative impact from Russia.
Job creation this year has been even a bit larger than expected, but still rather weak and not in all industries. Fragile employment growth will continue further. The unemployment rate will most likely be a tad below 10% on average this year.
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