The latest data from the labor force survey paint a very encouraging picture. The most important news is that in comparison with previous year unemployment decreased from 7.9% to 6.6% in the 2nd quarter of this year. Registered unemployment decreased even faster during this time – from 7.7% to 6.2%.
Other good news – the number of employees has increased by 2.8%, reaching 886,000. However, it still falls behind the indicator before the pandemic started two years when it surpassed 900,000 employees. Within a year, the employment rate also increased – from 62.4% to 64%. It is still one percentage point behind the average indicator in 2019 average, but it is clearly moving in the right direction. Until then, Pēteris Strautiņš, the economist of Luminor Bank, reminds us of the good news.
«Unfortunately, the nearest future of Latvia’s economy is darkened by the war in Ukraine and everything related to it, as well as the rise in energy prices. Therefore, at the end of this year and the first half of next year, an increase in unemployment is expected,» predicts the economist
«THE FIRST SMALL DANGER SIGNAL IS THE INCREASE IN REGISTERED UNEMPLOYMENT IN JULY COMPARED TO JUNE, ALTHOUGH DUE TO SEASONAL FACTORS IT SHOULD DECREASE SOON.»
The near future of the labor market is clouded by two major risks. The rise in energy prices, (in some sectors combined with the drop in product prices) will create competitiveness problems in industry. On the other hand, household austerity measures imposed by the cost of living will affect the trade of long–lasting and luxury goods, restaurants, and entertainment.
When it comes to export industries, there are first news spreading about the shutdown of production companies due to high electricity prices. The biggest risks are seen in the wood industry – the share of electricity expenses in the turnover is higher here, the prices of some products are falling. It would be natural to expect a temporary reduction of jobs in this field, especially in areas where there are still many companies that have a small scale of operations that are combined with the production of standard products, that means– mostly outside the big cities. In the division of regions, the greatest risks could be in the eastern part of Vidzeme, in some areas of Kurzeme.
SPECIFIC RISK OF INCREASE IN UNEMPLOYMENT IS IN LATGALE, WHICH MAY BE AFFECTED BY FURTHER JOB REDUCTIONS IN RAILWAY AND RELATED ENTERPRISES.
Speaking of Riga, the export prospects here are relatively good, but the impact of the increase in gas prices will be concentrated in the capital and its surroundings. The proportion of gas in the structure of primary energy resources of Rigas Siltums is not the highest, it is around 50%, but there is a large number of households whose heat costs are more or less affected by gas prices. Also in Latgale, the effect of the gas price increase on household expenses will be quite pronounced, where it is used a lot for heating in the big cities, such as Daugavpils and Rēzekne.
Strautiņš also points out that the latest labor force survey data is interesting not only with the decrease in unemployment and the increase in employment that fit well in the overall macro data picture, but also with the large and growing gap between male and female unemployment.
«IT COULD BE DUE TO STRUCTURAL CHANGES IN THE ECONOMY.»
In the previous ten years, the difference between the proportion of job seekers among men and women fluctuated around a couple of percentage points. In the latest data, it reached 3.8 % points. The proportion of job seekers among women has fallen to 4.7%, which is similar to the level reached three years ago (in the period for which data are available, that is, since 2012). If men’s unemployment is exactly the same as in the fourth quarter of 2020 (8.5%), then women’s unemployment has decreased by 2.5 percentage points (pp) during this time.
Perhaps this reflects changes in the structure of the economy, Strautiņš assesses. «We have a long–standing low industrial share and lately construction and transport fields have not been doing well. It is to be hoped that the Recovery and resilience mechanism, or the overcoming pandemic consequences fund, and the acquisition of money from the current period of EU funds will help the construction. Until now, there have only been beautiful schedules of the Ministry of Finance with plans to acquire this money already this year, but in practice nothing is happening.»
This situation is rather unusual against the background of the EU. In the EU, on average, in the first quarter of this year (latest available data), unemployment among women was slightly higher–6.8% against 6.2% for men. Male unemployment was higher in 13 member states, but the difference in Latvia (2.1 pp) was much larger than in all other countries, followed by Malta (1.2 percentage points), then Austria (1 pp) and Romania (0.9 pp).