Indicating a still stable situation in the labour market, the unemployment rate in Latvia did not change significantly in the second quarter of this year (it stood at 7.0%, 0.1 percentage points lower than in the previous quarter, though admittedly slightly higher than a year earlier). Although uncertainty prevailed in the external economic environment, demand for labour in Latvia as a whole remained sufficient for employment to grow. As previously economically inactive people entered or returned to the labour market, the employment rate rose slightly over the year.

Certain indicators characterising the economy (for example, strong growth in manufacturing) in the second quarter of this year suggest that economic activity has continued to recover gradually, which in turn has created more favourable conditions for employment growth. A significant reason for the decline in unemployment over a longer period is also that the supply of labour in Latvia is not increasing substantially – the workers needed often have to be found among the existing unemployed. Some support also comes from rising economic activity among the population, although this only partly offsets the ageing of society. Nor are significant changes in the working-age population visible as a result of migration. Consequently, even under conditions of moderate economic growth, companies continue to need labour. This is also indicated by company survey data, which show that a significant share of business owners, particularly in manufacturing, consider a shortage of labour to be a substantial factor limiting production.

However, some recent developments may raise questions about the further trajectory of the labour market, namely the recent reports of collective redundancies at individual companies, mainly in Latgale. Although the first thought might be that this signals weakness in the economy, the reasons for such company decisions vary, including restructuring of operations and increasing efficiency. Moreover, collective redundancies would affect only an insignificant share of those employed in the region. In human and social terms this is painful, but if someone has been employed previously, they have better prospects of finding other work and of getting through a period without work relatively quickly, despite the fact that the unemployment rate in Latgale has for a long time been substantially higher than elsewhere in Latvia. The dynamics of the registered number of unemployed in Latgale likewise show no trouble for the time being, and the number of unemployed continues to fall (in July it was almost a thousand lower than at the start of the year, and compared with July of the previous year it had fallen by more than six hundred). 

Demand for workers also remains strong in the country as a whole, and there are no significant changes in the supply of labour, so unemployment this year will most likely continue to decline moderately, and the labour market in Latvia will remain tight.