BAKU, Azerbaijan, August 15. Latvia’s economic growth has been on the fast track in the first half of this year, and it’s showing its colors in the labor market as well, Trend reports.
In the second quarter, the number of employed persons increased by 6,900, or 0.8 percent, compared to the same period last year, while the unemployment rate dropped by 0.2 percentage points to 6.7 percent, according to the latest labor force survey data from the Central Statistical Bureau.
A similar decline in unemployment was indicated by the State Employment Agency’s registered unemployment data. This summer, the number of registered unemployed fell to a historic low of just above 43,000. By the end of July, the registered unemployment rate had decreased to 5.0 percent, down by 0.2 percentage points compared to the same month a year earlier.
The growing appetite for labor has certainly set the wheels in motion for economic activity, with the workforce swelling by 4,800, or 0.5 percent, year-on-year in the second quarter. This growth in activity was the main factor behind the significant increase in employment, while a smaller part of the improvement was due to the reduction in unemployment by 2,100, or 3.2 percent.
The writing is on the wall, as demographic trends and the dwindling working-age population will keep casting a long shadow over economic activity and employment indicators moving forward. On one hand, decreasing labor supply and rising demand—along with higher wages—will encourage more people to enter the labor market, raising activity levels. On the other hand, the total number of employed is expected to remain stable or slightly decrease due to a shrinking working-age population.
In alignment with the latest macroeconomic projections disseminated by the Ministry of Finance in early June, a contraction of 0.2 percent in the labor force participation rate is anticipated for both the current fiscal year and the subsequent one. Concurrently, the labor market indicators suggest a trajectory of diminishing unemployment rates; however, considering the elevated metrics observed in Q1, the annualized average for 2025 may stabilize around the previous year's benchmark of 6.9 percent. In the ensuing years, a more accelerated contraction is projected, with the unemployment rate potentially descending to 5.5 percent by the year 2029.
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