Flash comment: Lithuania - August 10, 2018
Unemployment rate at its lowest in almost a decade
The rapidly growing economy and high wage growth did not go unnoticed in the labour market. The rate of unemployment dropped to 5.9% in the second quarter of this year and was 1.1 pp lower than a year ago. This was the lowest rate of unemployment since Q3 2008. Although the workforce declined by 0.6% over the year, which was a result of shrinking working-age population, the number of employed increased by 0.6% in Q2, compared to the same period a year ago.

The recent labour market data came as a positive surprise. The majority of the unemployed have for a long time missed out on the employment opportunities because of skill and/ or location mismatches, or they were simply unwilling to work. But, apparently, it was only a matter of time before businesses started tapping into this vast pool of previously “structurally” unemployed. Long-term unemployment as well as youth unemployment declined considerably in Q2 of this year. The rate of employment increased to 72.1% in Q2 reaching all-time-highs.

But it is not only the previously unemployed that are contributing to employment gains, but also the immigrants. The number of people arriving to live in Lithuania has been exceeding the number of emigrants for the past three months. The immigrants are not only the returning Lithuanians, but also foreigners, arriving mostly from Ukraine and Belarus for employment in Lithuania.

Outlook: labour market will stay tight

Given the favourable economic trends, the situation in the labour market is likely to continue improving, albeit at a slower pace. The recent decline in unemployment and shrinking working age population indicates that the labour market is rapidly approaching its limits. Tight labour market will support further rapid wage growth.

However, there is a positive risk that improving migration trends may ease the tensions in the labour market somewhat.

For more information about this report, please contact Laura Galdikienė, +370 5 258 2275, Laura.Galdikiene@swedbank.lt

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