Flash comment: Lithuania - May 12, 2017
Employment drops in Q1 as expected

The unemployment rate increased in the first quarter of this year to 8.0%, but was 0.3 percentage points lower than a year ago. As activity growth is close to its limit and was too low to compensate for shrinking working age population, labour force decreased by 0.7% compared with a year ago. This was the only reason behind decrease in unemployment as employment declined by 0.4%.

Outlook: employment will continue to decline

Although unemployment remains at elevated levels, regional disparities are large, unemployment rate is close to pre-crisis levels in main cities. Last year unemployment in Vilnius was at 3.7% compared with country average of 7.9%. Activity rate is close to its limits, structural unemployment is high due to skill mismatch and inability or unwillingness to move to places where jobs are created. Therefore we expect further decrease in employment. However, unemployment will still decline to 7.4% this year and 6.9% in 2018 due to shrinking labour force.

Wage pressure will not ease because economic growth is gaining speed and demand for labour will remain high. The number of registered vacancies in Lithuanian labour exchange has not been rising recently, but it remains significantly higher than the number of registered unemployed per month or the number of employed by Lithuanian labour exchange. Nevertheless, shrinking working age population and skill mismatch is limiting economic growth and needs to be addressed.

 For more information about this report, please contact Ms. Vaiva Šečkutė, +370 5 258 2156 , Vaiva.Seckute@swedbank.lt

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