Flash comment: Lithuania - May 10, 2019
Employment growth exceeds expectations

Lithuanian labour market continued its strong run in the first quarter of 2019, solid economic expansion fueled demand for labour. Unemployment rate declined to 6.5%, 0.7pp lower than a year ago. Meanwhile annual employment growth was 2%, well above expectations.

Most of improvement comes from the inactive parts of society. Rapid wage growth seems to lure previously inactive people and integrate them back in to the labour market. Activity rates in 15-64 age range is beating record after record and has reached 77.8% and has improved by 1.6pp compared to 2018 Q1. Improving activity boosted annual labour force growth to 1.2%.

Employment rate (15-64) stood at 72.5% in first quarter. Youth employment grew 2pp over a year, however in age group 55-64 employment rate did not improve and it could signal a mismatch in demand and supply of skills in that age group.

Outlook: Risk of overheating

Labour market keeps taping into previously unutilized resources. There is a risk that the rapid wage growth induced by the tightness of the labour market will undermine competitiveness and overheat the economy, but currently there are no stark warning signs apart from wage growth exceeding productivity.

Long term unemployment rate still stood at 1.8%, and while declining rapidly, shows that there is still some slack. Migration could become welcome relief for the labour market. Cumulative net migration for this year already stands at +1602, and in April migration even tipped the population growth rate into the positive area – for the first time in a very long time..

For more information about this report, please contact:

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

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