Flash comment: Lithuania - February 8, 2019
Labour force has grown in 2018

Labour market continued to tap into previously underutilised groups of population. The tightness of the labour market incentivises companies to look for employees among the young and the elderly. Similarly, previously inactive people seem to be drawn to work by rapid wage growth.

All labour market indicators improved last year. In line with our forecast, unemployment rate decreased to 6.2% in 2018 and was 0.9 pp lower than a year ago. Long term unemployment declined 0.7pp and stood at 2%. Employment grew by 1% despite shrinking working age population. Due to increasing activity rates labour force inched up 0.1%. Employment rate in age group of 15-64 increased by 1.7pp in 2018. Youth employment rate and that of people aged 55-64 made more gains in employment at 1.9pp.

Outlook: Healthy labour market will boost demand

When it seems that all resources of Lithuanian labour market are exhausted it continues to surprise positively. It looks like natural rate of unemployment is lower than was initially estimated. Although labour market is running quite hot, as signaled by double digit wage growth, it is not translating into significant inflationary pressures.

Given Lithuania’s poor demographic outlook is difficult to project much more improvement in the labour market in the near term. We expect unemployment to stay at the same level this year with moderate gains in the number employed. However, if the positive trends in migration were to continue it could contribute significantly to healthier labour market.

 For more information about this report, please contact:

Vytenis Šimkus, +370 687 17870, vytenis.simkus@swedbank.lt.

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