The stage of joys in the economy seems to come to an end. The Finnish Government expects improvements in the labor market to slow down during this year and next, after an "exceptionally positive development in 2018". The latest labor market forecast published today by the Ministry of Economic Affairs and Employment points out that "both this year and the next, employment growth is predicted to halve compared to the previous year".
The Government's short-term labor market forecast anticipates that in 2019 employment will grow by about 35,000 people in the whole Finnish economy compared to the previous year. In 2020 the growth is expected to slow down to just 15,000, less than half. In the same way, the fall in unemployment will level off.
The employment rate is forecast to increase to 72.8 percent this year, and to 73.4 percent next year. However, the labor market mismatch, structural unemployment and the change in the age structure of the population are already beginning to limit employment growth.
GDP also slowing down
The Government anticipates these predictions amid an economic scenario in which the growth of the Finnish economy as a whole is also slowing. The Gross Domestic Product (GDP) growth forecast by the Ministry of Finance will be 1.7% for this year and 1.4% for 2020. This is because the growth of export demand and the growth of investment demand will both slow down. GDP growth will be sustained by domestic demand and especially by private consumption.
In a scenario such as that described above, the development of labor demand in the main branches of economic activity will vary. The study predicts that employment growth in the industry will stay at the level of the previous year (2018) while in construction "will not grow anymore".
However, employment in services will increase by 33,000 persons in 2019 and by 17,000 in 2020. "For this and next year, employment growth relies entirely on the service sector", said the Ministry of Economic Affairs and Employment.
Labor force decrease
This year and next year, the labor force will grow by 7,000 persons, showing "a marked decrease" compared to what happened in 2018. However, labor force participation rate will continue to grow to 66.6 per cent this year and to 66.7 per cent next year.
Given that the size of the workforce no longer grows significantly, the unemployed are expected to account largely for the increase in the number of people employed, the experts believe. Therefore, the Government predicts that average unemployment rate will fall to 6.3 percent this year and to 6.0 percent in 2020.
The number of unemployed in labor force survey will decline to 174,000 in 2019 and 166,000 persons in 2020.
Source: Ministry of Economic Affairs and Employment/Finnish Government.
Unemployment reduction
The Finnish Government explains that the "dramatic fall in the number of registered unemployed" seen in 2018 (according to the statistics of the Unemployment Service) "is slowing down, and the forecast has been revised accordingly".
Youth unemployment appears to be the most severely affected: the number of employed people under 25 years of age is likely to reach 30,000 this year. This is an increase 10,000 compared since 2008, before the global financial crisis.
The forecast also anticipates that while the total number of unemployed will continue to decrease in the next few years, the number of new long-term unemployed will not. "Consequently, the fall in the number of long-term unemployed will slow down and come to a halt", says the the Government in the release.
The short-term labor market forecast of the Ministry of Economic Affairs and Employment is based on a time-series analysis that uses economic indicators, labor market statistics and policy information, as well as the Ministry of Finance's GDP forecast and the demographic forecasts of Statistics Finland. This forecast is published twice a year.
If you want to read the original text of the labor market forecast published by the Ministry of Economic Affairs and Employment, you can find and download it HERE
