Unemployment at 7.2 % in Q1, employment increases marginally
The unemployment rate stood at 7.2% in the first quarter of this year and was 0.8 pp lower than a year ago. Somewhat unexpectedly, the annual decline in the labour force eased to -0.8% and the decline in employment stalled (+0.1%). Despite rapid economic growth, the tensions in the labour market are no longer rising as steeply as before – the share of firms reporting that a shortage of labour is limiting activity has stabilised recently.
The more positive than expected labour market outcomes could have been related to improving migration trends. In the first four months of this year immigration flows (returning Lithuanians as well as foreigners) were double those of a respective period of last year, while the number of emigrants declined by 27%. It is likely that a large share of foreigners working in Lithuania may not even be reflected in the official statistic, but is working towards easing the tensions in the labour market (at least in some sectors, e.g. construction).
Outlook: negative demographics is a headache
Despite more positive labour market outcomes in the first quarter of this year, we do not expect that employment will return to a solid growth path over the rest of the year. The negative demographic trends will drive the number of employed down. The decline in unemployment will be slower and is expected to drop to 6.9% this year and stay at the same level in 2019, unless structural unemployment problems are addressed.
However, there is a positive risk to the developments in the labour market associated with more rapid improvement in migration trends.
For more information about this report, please contact Mrs. Laura Galdikienė, +370 5 258 2275, Laura.Galdikiene@swedbank.lt
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