According to Labour Force Survey data from the Central Statistical Bureau, the number of people in employment in the fourth quarter of 2024 fell by 1.2%, or 10.5 thousand, compared with the fourth quarter of 2023, while the average number of people in employment in 2024 fell by 0.8%, or 6.8 thousand, compared with 2023.

The decline in the number of people in employment has been driven to a large extent both by the slowdown in economic growth and by supply-side factors in the labour market – the falling working-age population, as well as the drop in the overall labour supply.

In total, 867.2 thousand people were in employment in the fourth quarter of 2024, or 63.4% of all residents aged 15 to 74. On average in 2024, meanwhile, the number of people in employment was 877.4 thousand and the employment rate was 64%, which is 0.2 percentage points lower than the average for 2023.

It should be noted that the employment rate in Latvia still remained lower than in its neighbours – 5.1 percentage points lower than in Estonia (68.5% in the fourth quarter of 2024) and 2.7 percentage points lower than in Lithuania (66.1% in the fourth quarter of 2024).

Given both the slowdown in economic growth and the fall in demand for labour, the unemployment rate rose to 6.9% in the final quarter of 2024, which is 0.1 percentage points higher than at the end of 2023, while on average in 2024 the unemployment rate rose by 0.2 percentage points, to an average of 6.9% for the year. In total, 63.8 thousand people aged 15 to 74 were looking for work in the fourth quarter of 2024, which is 0.6% (0.4 thousand) fewer than in the fourth quarter of 2023.

Alongside the decline in labour market activity, participation in the labour market has now fallen for the second quarter in a row. The activity rate fell to 68% in the fourth quarter of 2024, 0.6 percentage points lower than in the corresponding fourth quarter of 2023 (68.6%). In the fourth quarter of 2024 the number of economically active residents aged 15 to 74 stood at 931 thousand, which is 10.9 thousand fewer than in the fourth quarter of 2023.

It should be noted that, as the inflow of refugees from the war in Ukraine has decreased, this flow's positive effect on the dynamics of labour supply is also gradually running out. It should likewise be borne in mind that some of the war refugees are returning home, which makes the negative impact of demographic factors on the dynamics of labour supply more pronounced. Overall, the population aged 15 to 74 fell by 5.7 thousand in 2024 compared with 2023.

The labour market situation is expected to stabilise overall in 2025 and, as economic activity returns to the economy, the number of people in employment could also start to grow again. At the same time, the labour market situation will continue to be affected by supply-side factors and the unemployment rate could return to close to its 2023 levels, thereby aggravating the problem of labour availability. Overall, the unemployment rate could fall to an average of 6.5% in 2025, while the number of people in employment could increase by an average of 0.2%.