14.08.2012.

Rapid economic growth and broadly unchanged unemployment rate. Why?

The labour survey data for the second quarter of 2012 suggest that employment has grown along with high economic activity. At the same time the unemployment rate has also remained high. It has resulted from an increase in the economic activity promoted by the economic growth and new job opportunities as well as by the implemented national employment policy. Such developments should be treated positively; nevertheless, they raise the unemployment rate. Therefore the conclusions related to the high unemployment rate in Latvia should be drawn after a careful assessment of the factors affecting it.

The rate of jobseekers or the unemployment rate shrank by a mere 0.2 percentage point over the quarter. In view of the spring/summer seasonal jobs, it is an unusually small fraction. 16.1% of jobseekers is quite a high rate and some observers of economic processes might see it as a considerable slowdown or even standstill in the recovery of the Latvian labour market.

However, a more detailed analysis does not confirm this opinion.  The slow decline in unemployment has mostly been caused by a notable increase in the economic activity – currently it is close to its historic high (the shares of economically active population in the age groups of 15–64 years and 15–74 years are 74.7% and 66.5% respectively).[1] It is a prominent achievement, even given the positive impact of the demographic developments (in the last few years the share of population of the age group of 25–54 years has widened). Expanding active labour market policy measures during the crisis (temporary jobs, vocational retraining, etc.) had a significant role in maintaining high economic activity and reducing the hidden unemployment (e.g. persons who have lost hope to find a job, etc.). It seems that the growing opportunities of finding a job stimulate more and more people to become active again in the labour market and to resume seeking job opportunities. With such persons joining the jobseekers, the unemployment rate increases. Thus the steady unemployment rate and the high economic activity at this stage are two sides of the same coin, reflecting positive developments in the national economy.

Employment data suggest the persistence of sustainable recovery in the labour market as well. Employment growth in Q2 2012 compared to Q1 was similar as in 2011. Employment growth is confirmed by all available statistical data sources. According to the State Revenue Service data, the number of the employed paying their social insurance contributions increased to 769 thousand in May 2012, moving up by 58 thousand from the lowest point in early 2010. Similarly, the business survey data of the Central Statistical Bureau suggest that the number of jobs grew by 57 thousand from the first quarter of 2010 till the first quarter of 2012.

It should be noted as a positive factor that the labour survey results have been published unusually early this time. Just like a doctor's prescriptions cannot be based on outdated medical tests, the shaping of the economic policy requires as recent data as possible.


[1] The economic activity rate up to 2011 was most likely overestimated. Consequently, a historic high of the economic activity rate (in the age group of 15–64 years) could have been reached in the second quarter of 2012.

APA: Krasnopjorovs, O. (2019, 15. sep.). Rapid economic growth and broadly unchanged unemployment rate. Why?. Taken from https://www.macroeconomics.lv/node/2198
MLA: Krasnopjorovs, Oļegs. "Rapid economic growth and broadly unchanged unemployment rate. Why?" www.macroeconomics.lv. Tīmeklis. 15.09.2019. <https://www.macroeconomics.lv/node/2198>.

Similar articles

Or log in with a social profile account:

Restricted HTML

Image CAPTCHA
Up