Labour market participation has reached the historically highest level

Unemployment in Latvia has settled in the one-digit range (Q3. – 9.7% of the economically active population), yet it is dropping at a slow rate: 0.1 pp. within the quarter and 0.9 pp over the year. Currently, unemployment is close to its natural level, with macroeconomic balance maintained and the reduced unemployment not exerting any substantial pressure on wages and inflation. Unemployment is expected to remain near its natural level also in the future.

The participation level has reached its historic high: 68% of the working age population (ages 15 to 74) have been employed or actively seeking a job. Thus the drop in unemployment reflects the actual situation in the labour market.  Unemployment decline is no statistical mirage that sets in when the long-term unemployed lose any hope of finding a job and become economically inactive (and thus not represented in unemployment statistics).

The unexpected increase in the number of long-term unemployed in the third quarter in all likelihood points to a statistical error (measurement; sample) and is within the limits of random fluctuation. In any case, this indicator cannot be representative of a change of the situation in the labour market. The number and share of long-term unemployed is an indicator, which is very much delayed vis-à-vis the business cycle and currently there is no reason for the increase.