Improvement in the labour market is stable
Like a seasoned ropedancer, the Latvian economy has been maintaining macroeconomic balance. Unemployment (in the second quarter, 10.7% of the economically active population) is close to its natural level. In these circumstances, it would only be possible to gradually and sustainably reduce unemployment through structural political means, i.e. through effectively carrying out active labour market measures instead of stimulating demand.
Good education is still the main social lift and insurance against unemployment. Even judging simply by the existence of a diploma (which does not always reflect a person's skills), unemployment among those with higher education (5.7%) is half that among people with secondary or vocational education and four times less than among those with basic education.
The rise in employment slowed down rapidly in 2014 (in the second quarter, the number of the employed was almost the same as a year ago). Such developments were projected previously, and they are primarily related to the shrinking of the cyclical component of unemployment. State Revenue Service data indicate that the rise in employment mostly takes place on account of pre-retirement and retirement-age population. In the future as well any rise in employment will be hindered by demographic developments, i.e. drops in the number and working age population. The shrinking in the cyclical component of unemployment as well as slower economic growth mean that from now on, unemployment will not fall (and employment will not grow) as rapidly as in 2010–2013. The participation of the population in the labour market (employed and jobseekers) is currently close to the historically highest level and there are no grounds for any rapid rise.
The unemployment level in Latvia matches the euro area average, yet natural unemployment in Latvia is slightly higher. It is mostly the result of crucial macroeconomic shocks (in 1991, 1998, 2009). The cyclical component of unemployment that has been exhausted in Latvia, is still positive, yet dropping, in the euro area overall. In recent months, the drop in the unemployment level became obvious also in the countries with the highest unemployment: Spain, Greece, Cyprus and Portugal.