EM: Job market will return to pre-crisis level by 2022-2023

Labor market could return to pre-crisis levels in 2022-2023, some sectors will lose jobs while others would see increases, according to the Economics Ministry (EM) medium- and long-term job market forecasts, as reported on June 25.

Given the consequences of the COVID-19 crisis, the total number of employees is expected to fall by 7.5% in 2020 (by almost 69,000) compared to 2019, while the unemployment rate is expected to rise to 11%, the Ministry says.

The situation in the labor market could stabilize and slowly return to growth in the second half of 2020, but in 2021 there could already be an increase in the number of employees - by 4.2% compared to 2020.

The unemployment rate could fall to 8.1% in 2021.

The relative rates of employment and unemployment could return to 2019 levels around 2022-2023, but the number of employees in absolute terms will not return to pre-crisis levels in the coming years, affected by both demographic processes and the need to increase labor productivity, projected the Ministry.

Some COVID-19 crisis effects may persist for a long time. Most heavily affected are passenger transport, travel and tourism operators, accommodation and catering services, various sectors of entertainment, arts and culture, etc. In many of these sectors, activity may remain at low levels for a long time, so some of these jobs may be lost.

Changes in population habits introduced by the crisis not only narrow individual activities but also create new opportunities and needs in the labor market. The less-affected sectors are expected to recover more quickly and will be the main driver of the economy in the coming years.

The most significant increase in new jobs is expected in professional, scientific and technical services, construction, information and communication services, as well as in the manufacturing industry.

By 2027, these industries could create nearly 25,000 new jobs, which is about 9/10 of the increase in all new jobs over an appropriate period.

In the medium term, the pressure on the labor market will continue to be maintained by demographic processes, while the main job opportunities will be driven by demand for replacement labor.

The population in Latvia will continue to shrink in the coming years, while the population's ageing trends will become more pronounced. By 2027, the population could fall by around 65,000, and by 2040 by almost 122,000, compared with the beginning of 2020. In total, in 2040, the population in Latvia could be 1.79 million.

The most significant reduction in population will be seen among people of working age. The population aged 15-64 is expected to fall by nearly 90 000 or more than 7% by 2027, which will also negatively refer to the overall labor force.

The number of economically active population as a whole could fall by 1.3% by 2027.

At the same time, the negative effects of demographic trends on labor supply are mitigated by an increase in population economic activity. By 2027, the level of participation of the population in the labor market could exceed 71%.

On the other hand, the unemployment rate could fall below the 6% level by 2027, thereby highlighting the problem of labor shortages.

With technological developments in coming years, more and more jobs will be automated. The largest reduction in jobs is expected in professions with a high proportion of manual and repeatable activities, as well as in specialties related to direct service, such as retail sales, call operators and similar professions.

In both the medium and long term, the risk of unemployment for people with low levels of education and without a profession will increase significantly.

Increased daily use of different technologies and innovations will demand for high-skilled workforce with education in science, particularly for information technology and engineering professionals.

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Economy
Economy