Unemployment growth in the fourth quarter two times lower than forecast

Chart. Real and registered unemployment in Latvia

The level of real unemployment is high. Nevertheless, according to the labour survey data published by the Central Statistical Bureau of Latvia (CSB) today its growth was two times lower than forecast by Eurostat. Eurostat estimate, commonly used by many commentators of the economic developments as an indicator of unemployment, exceeds the real unemployment rate by almost 2 percentage points. Consequently, Spain could take up the leading position in the field of unemployment alongside with Latvia, with Estonia and Lithuania following close.

The real unemployment rate estimated by Eurostat is the rate of jobseekers as featured in the CSB labour surveys, projected one quarter ahead taking into account the development of the registered unemployment. Yet at a time of rapid changes in an economy such forecasts may prove inaccurate.

As we have already pointed out on several occasions, the growth of the registered unemployment outpaced that of the real unemployment at the end of 2009. The reasons are as follows: higher motivation for the jobseekers to register with the State Employment Agency (SEA) at the turn of the year as well as much wider temporary employment opportunities (involving more than 20 thousand registered unemployed at the end of 2009).

Eurostat forecast that the rate of jobseekers in Latvia would reach 21.6% in the fourth quarter of 2009, yet the labour survey data published today by the CSB show that it was actually 19.7%. It means that Eurostat has overestimated the real unemployment and the estimate will be revised downwards by 1.9 percentage points in the nearest future. Alongside with the quarterly data, Eurostat will also revise downwards the monthly estimates. For instance, December 2009 forecast of real unemployment prepared by Eurostat (22.6%) will be revised downwards by about 2 percentage points.