Flash comment: Lithuania

Economic commentary by Economic Research Department November 16, 2012

Unemployment rate fell to 12.3%, further improvement is less certain

Employed, unemployed persons and activity and employment rates of the population aged 1564
1.8 1.5 1.2 0.9 0.6 0.3 0.0 80% 75% 70% 65% 60% 55% 50% 2007 2008 2009 2010 2011* 2012* Unem ployed pers ons , m (ls) Employed persons , m (ls) Employment rate, aged 1564 (rs) Activity rate of the population aged 1564 (rs)
* the number emlpoyed and unemployed is recalculated according to census results.

Rapid decrease in unemployment continued in the third quarter this year when it declined to 12.3% from 13.2% in second quarter this year (14.8% a year ago). Annual growth in employment continued increasing; however, decrease in unemployment was also supported by emigration. Net migration increased by 33.4% in the third quarter compared with the second. Although emigration this year is significantly lower than during the previous few years and there is some seasonality in quarterly increase in emigration, persistently high emigration flow remains a worry. Over the quarter labour force increased only by 0.1%, but labour force activity also kept increasing and was at 72.4% for population aged 15-64, or 0.4 percentage points higher than a quarter ago. Employment was 1.2% higher than last quarter and 3.1% higher than a year ago. Long-term unemployment rate decreased to 6.2% and was 1.8 pp lower than a year ago. The youth (aged 15-24) unemployment level, however, rose by 2.8 pp in a quarter to 27.5% (it is still 3.8 pp lower than a year ago). However, as youth activity rate is very low, only 1 in 12 young persons are unable to find a job. Outlook Registered unemployment has decreased faster in October and the number of registered vacancies remained close to five year high. Capacity utilization remains high and there is plenty room (and possibilities) to increase investments, which could further drive down the unemployment. However, decline in unemployment is likely to slow down as euro area crisis and local policy uncertainty is weighting on business confidence. Employment expectations of industry decreased to -2 in October, after being positive for 7 months. Employment expectations have been significantly lower in services sector for the last four months compared with the second quarter as well. Long awaited changes in rigid labour code have been postponed and new Parliament is less likely to increase labour market flexibility. Uncertainty regarding unsustainable increase in minimum monthly wage may also limit the employment growth of less qualified labour force, especially in sectors with lower wage levels (textiles and wood manufacturing, accommodation and food services).
Nerijus Maiulis Chief Economist + 370 5 258 2237 nerijus.maciulis@swedbank.lt

Source: Statis tics Lithuania

Unemployment rate%
40% 35% 30% 25% 20% 15% 10% 5% 0% 2007 2008 2009 2010 2011 2012 Unem ployment rate The youth (aged 1524) unemployment rate Long-term unemployment rate Source: Statis tics Lithuania

Employment expectations for the next 23 months, pts

40 30 20 10 0 -10 -20 -30 -40 -50 -60 2011 Cons truction Retail Source: Statistics Lithuania 2010 2012 Services Indus try

Swedbank Economic Research Department SE-105 34 Stockholm, Sweden ek.sekr@swedbank.com www.swedbank.com Legally responsible publisher Cecilia Hermansson, +46 8 5859 7720

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