Flash comment: Latvia

Economic commentary by Economic Research Department February 14, 2013

The unemployment rate at 13.8% in 4Q 2012
Labour market indicators, % of 15-74 population
20 70 65 60 10 55 5 1Q 11 3Q 11 1Q 12 3Q 12 50 Unemployment rate, % of econ.active Participation rate (rs) Source: CSBL Employment rate (rs)

The unemployment rate inched up to 13.8% in the third quarter of 2012 from 13.5% a quarter ago (down from 15% a year ago), according to Labour force survey by the Central Statistical Bureau of Latvia. This mostly can be attributed to seasonal factors. Annual employment growth in the fourth quarter was 2.9%, but net of active labour market programs employment rose by 4.3% implying about 37 thousand new jobs created during the year. On the contrary to previous quarters, employment growth was driven more by tradable sectors in the last quarter of 2012, especially manufacturing and tourism. The participation rate was 66.5% in the fourth quarter, same as a quarter ago, but up from 64.7% a year ago. During the year it rose the most for 65-74 years old (from 9.6% in 4Q 2011 to 12.3%), as well as 15-25 years old (from 37.6% to 40%) and 25-34 (from 86.4% to 88.6%). In 2012, job creation amounted to about 40 thousand persons, 4.8% more than a year ago (net of labour market programs). Dynamics across the industries differ a lot. The strongest employment growth in 2012 was in services, especially finance and real estate sectors (42% and 33%, respectively) and recreation and culture (40%). These three sectors comprise about 8% of total employment. The largest falls were observed in administrative and support services (-21%), and IT and communications (-14%) – these two sectors comprise 5% of total employment. Employment in manufacturing rose by 8%, while that in domestic trade fell by 5% − these are two largest sectors (each employing about 125 thousand persons), which comprise about 30% of total employment.


Contribution to employment growth, pp
4 0 -4 -8 -12 -16 1Q 09 1Q 10 1Q 11 1Q 12*
Source: CSBL * adjusted with 2011 Population Census data

Nontradables Tradables

We expect situation in the labour market continue improving. Confidence surveys show that employment expectations are growing in main sectors. Although companies are still cautious in raising their labour costs, a large part of them plan to increase somewhat the number of employees this year. We forecast unemployment rate to fall from 14.9% in 2012 to 13.6% this year. We expect more sluggish job creation than last year, as economic activity growth slows and competitiveness pressures persist; however, participation and employment rates will continue to grow.

Employment expectations, points
20 0 -20 -40 -60 -80 2008
Construction Manufacturing Services Retail






Source: DG ECFIN

Lija Straš una Senior economist + 371 6 744 5875 lija.strasuna@swedbank.lv

Swedbank Economic Research Department SE-105 34 Stockholm, Sweden ek.sekr@swedbank.com www.swedbank.com Legally responsible publisher Magnus Alvesson, +46 8 5859 3341

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