Slower rise in unemployment expected

In keeping with the predictions, the increase in registered unemployment in October was steady at 0.9 percentage points, reaching 14% of the economically active population at the end of the month.

Similar to September, the increase in registered unemployment was augmented by a greater motivation for job seekers to register with the State Employment Agency and to take part in field practices organized by local governments. As a result it is not the actual but registered unemployment that has increased.

As of August a second wave of registered unemployment has been observed. It involves all branches of the economy, and the reduction of the number of employees in the public sector represents a major contribution. Note that the first wave of increased unemployment took place from November 2008 to March 2009 and mostly involved lower qualified construction and processing industry workers. The increases in unemployment during this second wave, however, are not expected to be as high as during the first one. Already in October the number of people who have obtained an unemployed status was lower than in September.

In the next few months registered unemployment is expected to grow at a lower rate. This is supported by the data from the regular poll taken by the European Commission: the expectations regarding employment among entrepreneurs in all branches of the economy were more positive than in September. Expectations improved particularly rapidly in the processing industry and trade. Of course, such monthly data are unstable, however, compared to the first wave of increased unemployment, an improvement in employment expectations is pronounced in all branches.

The flash estimate of third quarter GDP and data on Latvia’s foreign trade in September, which confirm the trends toward a gradual stabilization of the economy, likewise point to slower increases in unemployment in the next few months. With the unemployment levels lagging behind the economic cycle, the recovery of the Latvian economy will be evident therein with a certain delay.