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Fast Comment FinlandSign of maturing cycle at the Finnish labour market

  1. Employment growth stalled in June
  2. Quite a sudden weakening in Q2 2019
  3. 75 percent employment target a challenge for the new government
Employment growth stalled in June
Statistics Finland’s Labour Force Survey showed that there was nearly the same amount of employed people in June as one year earlier. The seasonally adjusted unemployment rate remained at 6.5 percent, which is 0.5 percentage points lower than in June 2018. The employment rate, that is, the proportion of the employed among persons aged 15 to 64, stood at 75.7 percent, which is 0.2 percentage points higher than a year ago.
Quite a sudden weakening in Q2 2019
Employment growth has deteriorated quite rapidly during April-June this year, as in March the number of employed persons still increased by 2.5 percent y-o-y, but by June this growth was completely exhausted. Furthermore, the seasonally adjusted unemployment rate failed to fall below 6.5 percent. The peak in employment growth in this business cycle upturn looks to have taken place in mid-2018, at above 3 percent growth. Now that overall GDP growth has moderated markedly since the beginning of 2018, it is no surprise that the labour market improvement is gradually stalling, as employment growth historically lags overall economic growth. It is indeed noteworthy that the monthly GDP indicator posted economic activity growth of only 0.6 percent y-o-y in May.
75 percent employment target a challenge for the new government
The new Finnish government is targeting an employment rate of 75 percent by the end of 2023. That would require employment to grow by of almost 70,000 persons. Even with the help of gradual fall in the number of working age population (persons who are 15-64 years old), simple calculations indicate that the 75 percent employment rate can only be accomplished in a favourable business cycle environment with decent GDP growth. It may be a tall order to expect this upturn to last until 2023, given that the global economy already shows signs of maturing growth. Another factor making this goal hard to achieve is the growing labour scarcity. The current weak trend growth of the labour force is a presentation of this problem. Business barometers point to the same direction – particularly in the service sector, which has been the key sector for labour market recovery in Finland. The service sector is reporting that hiring difficulties have already peaked and have, in fact, somewhat eased in Q1 and Q2. Normally this has gone hand-in-hand with weakening labour demand.

 



Disclaimer

Tiina Helenius

Chief Economist Finland

Finland and Emerging Asia

tihe01@handelsbanken.se

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