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Data suggests Early Recovery on the Lithuanian Labour Market  

Date

2010 12 17

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The employment and job vacancy rates of the 3rd quarter of 2010 show that in Lithuania there has been a turnaround in the labour market cycle – the Beveridge curve changed its course. Such an early rise of the labour market is unusual, as the labour market indicators start improving only after two years pass from the beginning of the gross domestic product growth.

The Beveridge curve demonstrating the situation in the labour market acquired the reputation of a reliable early indicator when it was the first to announce the approaching economic recession. The shifts in the Beveridge curve at the end of 2007 were the first preliminary data, which gave a reliable warning of the economic cycle break and the forthcoming start of recession in Lithuania as well as in other Baltic States.

The shifts in the Beveridge curve in Lithuania were predetermined by the increased supply of jobs and a higher employment rate. During the 3rd quarter 2010, comparing quarter to quarter data, the number of job vacancies (without considering seasonality) in Lithuania went up even by 36 % (a year ago it decreased by 5.1 %, while two years ago – increased by 11.8 %).

As compared to the previous quarter, the employment rate (without considering seasonality) in the 3rd quarter of 2010 in Lithuania increased by 1.8 percentage points (a similar quarterly growth was fixed for the last time just in the 2nd quarter of 2007 – 1.5 percentage points).

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Source: Data by Statistics Lithuania

The graph shows that in Lithuania from the beginning of 2005 to the 3rd quarter of 2007 the economic cycle was at the expansion phase, while from the 4th quarter of 2007 the cycle expansion phase was replaced by the recession phase. The shift in the Beveridge curve in the 3rd quarter of 2010 shows the return of the economic cycle to the expansion phase.

The Beveridge curves indicating the situation in the labour market in the 3rd quarter of 2010 in Lithuania and from the 2nd quarter of 2010 in Latvia and Estonia have been changing their directions. This demonstrates the fluctuation in economic cycle phases of the Baltic States and signals about the end of recession in the labour market.

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Source: Data of statistical services of Lithuania, Latvia and Estonia

The Beveridge curves of the Baltic States indicate that in 2007 the economic cycles of Lithuania and Estonia shifted from the expansion phase to the recession phase at the same time, i.e. in the 4th quarter, while that of Latvia – 1-2 quarters earlier. However, the Lithuanian economic cycle shifted from the recession phase to the expansion phase in the 3rd quarter of 2010, i.e. 1 quarter later than those of Estonia and Latvia.

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Source: Data of statistical services of Lithuania, Latvia and Estonia

Partially, due to the number of job vacancies of low reference base, in the 3rd quarter of the current year the annual growth pace in the Baltic States was very high – 18.9 % in Estonia, 20.4 % in Latvia and even 45.3 % in Lithuania. While the number of job vacancies (without considering seasonality) in the 3rd quarter, as compared to previous quarter, in Lithuania grew even by 36 % (in the previous year – decreased by 5.1 %, two years ago – grew by 11.8 %), in Latvia – 26 % (in the previous year – decreased by 16.8 %, two years ago – decreased by 36.3 %), in Estonia – 11.6 % (in the previous year – 20.7 %, two years ago – 1.9 %).

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Source: Data of statistical services of Lithuania, Latvia and Estonia

Notwithstanding the fact that the employment rate in Lithuania and Estonia in the 3rd quarter of 2010 was still by 1.9 percentage point and 1.3 percentage point, accordingly, lower than in the previous year (in Latvia it was already by 0.8 percentage  point higher), in all the three states it was the highest one this year. As compared to previous quarter, the employment rate (not considering seasonality) in the 3rd quarter of 2010 in Lithuania grew 1.8 percentage point (the last time a similar quarterly growth was recorded only in the 2nd quarter of 2007 – 1.5 percentage point), in Estonia – 2.7 percentage point (the last time a lower quarterly growth was recorded in the 2nd quarter of 2006 – 1.4 percentage point), in Latvia – 1.7 percentage point, however in Latvia the employment rate saw a considerable growth also in the 2nd quarter of the current year (1.2 percentage point).

 

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