Labour market forecast: Employment rate to surpass pre-epidemic level in 2022 but long-term unemployment to grow further
Due to the progress made in coronavirus vaccinations and the improved epidemiological situation, demand for labour is on the increase and the labour market is expected to grow sharply already this year. The employment rate will surpass the pre-epidemic level in 2023, but the number of unemployed jobseekers will remain above the level preceding the epidemic.
On 2 June 2021, the Ministry of Economic Affairs and Employment published a labour market forecast until 2023. The forecast is based on the assumption that the restrictions on mobility and business activities can be lifted by autumn.
“The labour market forecast shows that employment will recover at a reasonable rate. On the other hand, the slower reduction in the number of unemployed jobseekers, and in particular the increase in long-term unemployment, are a cause for concern,” says Minister of Employment Tuula Haatainen.
“During this crisis, we have given a lot of support to companies and tried to preserve jobs. The outlook for the labour market would probably be gloomier without the measures. When the labour market improves towards the end of the year, we need to help as many people as possible back to work and prevent prolonged unemployment,” Haatainen adds.
Number of employed people not to reach pre-epidemic level until 2023
According to the labour market forecast, the employment rate will rise to 71.2% this year and to 71.8% next year, thereby surpassing the level preceding the epidemic. Due to the declining population, the number of employed people will not exceed the pre-epidemic level until 2023. The number of people employed is estimated to total 2,535,000 in 2023. Due to the break in the time series of the labour market survey, the employment rate series is currently about one percentage point lower than before.
Finland’s unemployment rate is forecast to remain at 7.7% this year as those outside of the labour force will begin to look for work. As more unemployed people find work, the rate is expected to fall to 7.3% in 2022 and to 6.7% in 2023.
Labour supply to return to pre-epidemic level already this year
The labour market forecast also examines the supply of labour, that is, the total number of employed and unemployed people. The labour force participation rate is estimated to rise to 65.9% this year, which will be sufficient to restore the amount of the labour force to pre-epidemic level despite the decline in the population. In 2021, the labour force will grow by around 15,000 people, and in 2022 by about 4,000 people. In 2023, the labour force is not forecast to grow because the working-age population shrinks.
Following the Government’s decision to increase work-based immigration, a larger number of such immigrants is likely to show in the population projections and the forecasts on the size of the labour force in the coming years. In addition, the Government’s objective to increase the number of foreign students who stay in Finland after graduation will probably show in the labour force forecasts at some point, but not yet in this forecast period.
Number of registered unemployed jobseekers to fall in 2021 while long-term unemployment to peak in early 2022
The number of registered unemployed jobseekers and young jobseekers in the Employment Service Statistics will begin to fall in 2021 as coronavirus-related restrictions are gradually lifted. In 2022 and 2023, their number will continue to decrease, but the number of registered unemployed jobseekers will remain at a higher level than before the epidemic. The average number of unemployed jobseekers will be 318,000 in 2021, 284,000 in 2022 and 267,000 in 2023. Meanwhile, there will be 39,000 young unemployed jobseekers in 2021, 33,000 in 2022 and 30,000 in 2023.
The number of long-term unemployed is forecast to increase during 2021 and to peak at the beginning of 2022, after which it is projected to fall as a result of the general positive trend in the number of registered unemployed jobseekers. According to the forecast, the number of long-term unemployed will total 111,000 in 2021, 115,000 in 2022 and 100,000 in 2023.
The short-term labour market forecast of the Ministry of Economic Affairs and Employment is based on a statistical time-series analysis that makes use of economic indicators, labour market statistics and policy information, as well as the Ministry of Finance’s GDP forecast and the demographic forecasts of Statistics Finland. The forecast is published twice a year.
Liisa Larja, Senior Specialist, Ministry of Economic Affairs and Employment, tel. +358 50 400 7352 (labour demand, employment)
Minna Ylikännö, Senior Specialist, Ministry of Economic Affairs and Employment, tel. +358 29 504 7102 (labour supply, population)
Juho Peltonen, Specialist, Ministry of Economic Affairs and Employment, tel. +358 50 471 1975 (unemployed jobseekers)