Facebook Blogging

Edward Hugh has a lively and enjoyable Facebook community where he publishes frequent breaking news economics links and short updates. If you would like to receive these updates on a regular basis and join the debate please invite Edward as a friend by clicking the Facebook link at the top of the right sidebar.

Saturday, February 23, 2008

Latvian Unemployment January 2008

Unemployment in Latvia seems now to have started to rise steadily accoring to the latest data from the Latvian State Employment Agency (NVA). Although slight, the increase in unemployment in Jan 2008 to 5 pct points to qualitative economic and labor market change, NVA said. And I completely agree. The market seems to have turned in November.

The level of registered unemployment had declined steadily from 8.7 pct in late May 2004 to 4.8 pct in November 2007. Since November the tendency is now up again. This is yet more indication of the presence of an economic slowdown in Latvia.

The unemployment rate in Latvia at the end of 2007 was 4.9 pct of the economically active population, while at the end of 2006 it was 6.5 pct. The unemployment rate increased 0.1 percentage point in January 2008 over December and reached 5 pct of the economically active population. There were 53,325 unemployed registered with NVA in late January 2007.

So my feeling is that Latvia is now out of the "extreme overheating" stage - and probably came out around in May-June (which isn't to say there wasn't a lot of momentum left in the system at that point). If you look at the charts included in my December Retail Sales post earlier this month you will see that retail sales growth really peaked during the first quarter. Manuafacturing output has been in fierce retreat since July, while the property market seems to have turned around May-June. In part this exiting from overheating will have happened becuase a process as fierce the one which took place in Latvia almost has to choke itself out of its own accord, and also possibly because of the tightening of the credit conditions applied after April, and the impact of this tightening on the housing market.

Also if we look at this unemployment data, it is clear that the labour market turned in October/November, and employment is normally a lagged indicator, which means it only responds after the horse has started to bolt. So my feeling is the overheating situation is now dead and gone, and what people need to think about are cushions to try and soften the landing. Which is why I am not 100% opposed to the idea of fiscal loosening at this point.

No comments: