Unemployment down at a lower rate; the inadequacy of skills to the labour market demand apparent
Albeit at a slower rate than in the previous months, registered unemployment continued to shrink in July (by 0.3 percentage points), reaching 15.3% of the economically active population by the end of the month.
The drop in the number of the unemployed in July is primarily related to the fact that an increasingly greater number of the unemployed lost their status by not meeting their commitment to repeatedly register etc. In spring, on the other hand, the number of the unemployed went down primarily because of a lesser number of unemployed status recipients and a greater number of those who had found permanent employment.
At the moment, the 9-month term in which unemployment benefits are paid has already run out for two thirds of the unemployed registered with the State Employment Agency (NVA) and they lack the motivation to maintain the unemployed status; registered unemployment thus probably drops at a faster rate than actual unemployment. (The actual unemployment rate is estimated by the Central Statistical Agency after a labour survey.)
The number of those who have newly been granted an unemployed status grew a little in July (up to 12.1 thousand) for a second consecutive month, confirming that the signs of labour market stabilization are still fragile.
Despite the high unemployment rate, in July the number of vacancies registered with the NVA continued to grow to a 20 month maximum (3.3 thousand), whereas the number of unemployed who had found permanent employment dropped to 5.6 thousand. Even though the increased number of vacancies indicates increased job opportunities, the opposing dynamic of these two indicators can indicate an inadequacy of labour skills vis-à-vis demand. On the one hand, some enterprises in the conditions of high unemployment find it difficult to find suitable employees. For instance, according to the data of the EC regular survey, 3.2% of the surveyed construction entrepreneurs in July considered a lack of labour the main business impeding factor (0.5% a year ago). The same applies to other industries as well, including processing industry, services. On the other hand, the demand for simple jobs - albeit for a very low pay - exceeds supply as can be observed from the increased number of those involved with the 100-lats programme (23.3 thousand in July). So the labour market in Latvia is currently divided into two basic niches - highly skilled workers that are still in rather high demand and unskilled workers that suffered much more as a result of the crisis as appropriate jobs shrank. This is confirmed also by the Central Statistics Agency data: in the first quarter of 2010, the unemployment rate among those with college education is three times lower than among those with basic education, and since the beginning of the economic recession this difference has grown substantially.
Thus, as economic activity grows and an inadequacy of labour skills vis-à-vis demand appears, a greater emphasis should be put not on temporary employment for the unskilled unemployed (the 100-lats programme), but on raising the skills of jobseekers, which would make them competitive in the labour market and allow them to gain jobs with high value added in the private sector. That in turn would allow the government to simultaneously address the problems of employment, business development, and sustained growth.