In Latvia, the actual unemployment rate increased to 8.1% in the first quarter / Article

Opinion

Mārtiņš Āboliņš, economist of the bank “Citadele”:

The rise in unemployment was expected in the past, as evidenced by the rise in registered unemployment, which reached 8.2% at the end of March. However, in the winter months, the seasonal rise in unemployment occurs every year and not all of the increase in unemployment is due to the impact of the Covid-19 pandemic, and unemployment in Latvia in the first quarter was lower than in the first wave of the Covid-19 pandemic, when it reached 8.6%.

The paradoxical situation in the labor market in Latvia as a whole is currently being observed. Unemployment has risen, but it is difficult to answer the question of how much actual unemployment is, because economic activity is artificially limited and many workers receive downtime benefits. For example, in February of this year, more than 60,000 people in Latvia received downtime benefits. It is therefore clear that the true level of unemployment and the long-term impact of the pandemic on the labor market will only be assessed once the various restrictions have been lifted.

The good news is that unemployment has started to fall in April and May, and unemployment has already fallen to 7.6% in the second of May. The relatively high unemployment rate is still mainly due to restrictions on the operation of hotels, catering and entertainment, as well as certain other personal services. And this unequal impact of the Covid-19 crisis on the economy also explains why youth and women’s unemployment has risen significantly more than men’s.

However, despite the rise in unemployment, according to our customers, large amounts of state support have even led to an increase in household incomes and the rapid accumulation of funds by households and businesses. In February, household savings in the Baltics were 15-22% higher than before the start of the pandemic, while in Latvia, household savings in banks in 2020 have grown by about 1 billion euros. These additional savings represent a significant potential for deferred consumption of resources in both the services and trade sectors.

Currently, vaccination against Covid-19 has gained momentum in Latvia as well. This makes it possible to plan for further easing of restrictions and opening up of service sectors, which will contribute to both economic recovery and further decline in unemployment. According to my forecasts, unemployment in Latvia could fall to 7% in the second half of this year. Unemployment, on the other hand, is likely to reach pre-Covid-19 levels next year. At the same time, difficulties in finding employees are already beginning to appear in business surveys, which suggests that the issue of staff shortages will be very relevant again in the near future. This will be further exacerbated by forthcoming EU investment in construction.

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In the 1st quarter of 2021, 39.7 thousand unemployed were unemployed for up to 5 months. This is 0.3 thousand less than a year ago, but 0.5 thousand more than in the previous quarter. 14.6 thousand were unemployed for 6-11 months. The number of these persons has increased compared to the 1st quarter of the previous year (by 1.6 thousand), but has decreased compared to the previous quarter (by 1.2 thousand).

In the 1st quarter, there were 20.4 thousand long-term unemployed – by 0.9 thousand less than a year ago and by 0.2 thousand less than in the 4th quarter of 2020.

In the first quarter, the share of the long-term unemployed in the number of unemployed was 27.3%, the same as in the previous quarter. Compared to the corresponding period of the previous year, it has decreased by 1.4 percentage points.

Youth unemployment

In the 1st quarter of 2021, the youth unemployment rate (15–24 years) was 16.3%, which is 1.5 percentage points higher than a year ago and 5.0 percentage points higher than in the previous quarter. During the year, the number of young unemployed has decreased by 0.5 thousand, but increased by 2.3 thousand compared to the previous quarter.

In the first quarter, 11.4% of all unemployed were young people. Their share decreased by 0.8 percentage points during the year, but increased by 3.2 percentage points compared to the previous quarter.

In the 1st quarter, 30.4% of all young people were economically active, ie employed or actively looking for work (unemployed), but 69.6% of young people were economically inactive – mostly still studying and not looking for work.

Economically inactive population

In the 1st quarter of 2021, one third (33%) or 457.4 thousand people aged 15 to 74 were economically inactive, ie they were not employed and did not actively look for work. Compared to the previous quarter, the number of economically inactive population has increased by 31.2 thousand or 7.3%, but during the year – by 39.8 thousand or 9.5%.

In the first quarter, 7 thousand or 1.5% of the economically inactive population had lost hope of finding a job. For comparison, a year earlier it was 3%, but in the 4th quarter of 2020 – 2.5%.

In the 1st quarter of 2021, 4.2 thousand households participated in the labor force survey on economic activity, in which 7.3 thousand people aged 15 to 74 were surveyed, while in the age group from 15 to 89 – 4.6 thousand households were surveyed. , 2 thousand inhabitants.

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