According to the latest Eurostat figures, Latvia's unemployment is the EU's highest. Fellow Baltic states Lithuania and Latvia are not far behind. Source: Eurostat
RIGA — Latvia has overtaken Spain for the dubious distinction of the highest unemployment in the European Union, according to the latest data from Eurostat.
The EU statistics agency announced Friday that in September unemployment in Latvia hit 19.7 percent, surpassing the 19.3 percent in Spain, which in recent months has had the highest rate of joblessness in the bloc. Nearly every fifth working-age person is unemployed in Latvia.
The most striking aspect of the data is how rapidly unemployment in the Baltic state has risen: from 8.1 percent in September 2008 to 19.7 percent last month, clearly evidence that Latvia’s economy has undergone an unprecedented hard-landing. September unemployment in Lithuania was 13.8 percent and in Estonia 13.3 percent, according to Eurostat. Average unemployment for the 27-member bloc was 9.2 percent for September, while in the United States it was 9.8 percent.
It is important to note that, according to Eurostat’s definition, people are classified as unemployed if they are jobless, available to begin work in two weeks, or have sought a new job during the previous four weeks. By contrast, the latest statistics from Latvia’s State Employment Agency show that unemployment — defined as the number of people receiving unemployment benefits — was only 13.2 percent in September.
The highest level of joblessness was 28.1 percent in Rezekne region, while the lowest was in Tukums at 9 percent, according to the agency.
The burning question is how high unemployment will climb. Estimates vary, but some Latvian economists have forecast could top off at 20 percent according to Latvia’s methodology, which in Eurostat terms would likely mean 25 percent — similar to what the United States experienced in the Great Depression.
The consensus among most economists is that recovery in employment levels will not happen anytime before the second half of 2010.
If there’s any silver lining, it would appear that the steep correction in the labor market — i.e., lower wages, higher productivity — is gradually rectifying the imbalances that accrued during the “Baltic Tiger” years and Latvia’s workforce is becoming competitive once again. According to a recent report by Swedbank, productivity per hour grew 5.9 percent in the second quarter.
