Flash comment: Lithuania - August 14, 2015
Unemployment dropped to 9.4% in Q2 on the back of strong employment growth

Labour market remained resilient despite the temporary slowdown in the economic growth. Unemployment dropped to 9.4% in the second quarter this year - 0.6 percentage point (pp) lower than a in the first quarter and 1.8 pp lower than a year ago. Youth unemployment declined to 16.7% (3.2 pp lower than in the previous quarter and 4.6 pp lower than a year ago), while long-term unemployment inched up to 4.3% (0.1% higher and 0.7% lower, respectively).

Despite struggling exports, job creation remained strong, the number of registered vacancies at the labour exchange continued rapidly growing and the number of vacancies at the end of July was at the highest level since the beginning of 2008. Decline in unemployment was supported by continuously strong employment growth. Annual employment growth unexpectedly accelerated from 1.7% in the first quarter to 2.1% in the second.

Activity rate (for 15-64 year-olds) increased from 73.4% in the first quarter to 74.1% in the second quarter and was by 0.5 pp higher than a year ago. As a result labour force did not change in a year and even increased by 0.8% in a quarter and therefore did not contribute to decreasing unemployment.



Outlook

We expect employment growth to slow down during the rest of the year due to weak eastern export markets and high structural unemployment. Bigger and bigger share of unemployed do not have appropriate skills or are not willing to move to places where jobs are created. It will be increasingly hard to find the right employees as unemployment rate is close or even below its natural rate. However, Russian sanctions did not have an immense effect on Lithuanian economy, even in such vulnerable sectors as transportation as companies were able to diversify and shift their vehicles to the routes in South and West Europe. Truck drivers are actually still one of the most demanded employees. Moreover, labour force will contract during the coming years. Therefore we expect that unemployment will drop by about 1 pp this year and the next.


For more information about this report, please contact Ms. Vaiva Šečkutė, +370 5 258 2156, Vaiva.Seckute@swedbank.lt

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