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Ministry forecast: Labour market slowing

Finland's labour ministry expects employment growth to significantly slow next year.

For this and the next year, employment growth will rely entirely on the service sector. Image: AOP

The Ministry of Economic Affairs and Employment's latest job market forecasts employment rising to 72.8 percent this year, and to 73.4 percent next year.

However, it also says that labour market mismatch, structural unemployment and the change in the population age structure are already starting to limit employment growth. For this and the next year, employment growth will rely entirely on the service sector.

Since the overall workforce is no longer significantly expanding, the rise in the number of employed people suggests that unemployed are finding jobs rather than new people entering the workforce. The average unemployment rate is expected to fall to 6.3 percent this year and to 6.0 percent next year.

Returning to "normal"

Analysts in a number of sectors, including construction, have been expecting economic growth to tail off.

"Construction started growing in 2015, a little before the rest of the economy and other sectors. It has shown rather strong growth over the past four years. Now we are returning to a more normal level," says Jouni Vihmo, Chief Economist at the Confederation of Finnish Construction Industries (RT).

Story continues after photo.

Jouni Vihmo Rakennusteollisuuden pääekonomisti rakennuksella.
There's an old joke that the construction sector is either overheated or in recession, but now I believe that this slowdown will not be dramatic, says Jouni Vihmo. Image: Mårten Lampén / Yle

Vihmo also thinks that reaching an employment rate target of 75 percent is becoming increasingly challenging.

"With these resources, it looks rather difficult. We have put to work all the people capable of working in Finland during this economic upswing. Indeed, that employment target is getting really much more difficult all the time," he says.

On the other hand, for the construction industry, the downswing is unlikely to be very sharp. Ongoing projects will be completed and new ones keep coming along. Over the past few years, the construction sector has had problems getting enough workers.

The Ministry of Economic Affairs and Employment, with the expected downturn in the economy recruitment problems in the construction sector will not get worse, but the basic causes for a lack of suitable workers will not be going away.

Concerns about youth and long-term unemployed

The ministry report states that the dramatic fall in the number of registered unemployed is also slowing down, and youth unemployment appears to be most severely affected. The number of employed people aged under 25 is likely to total about 30,000 this year, an increase of 10,000 from 2008, before the financial crisis.

While the total number of long-term unemployed will continue to decrease over the next few years, the number of new long-term unemployed will not. As a result, the fall in the number of long-term unemployed will slow down and come to a halt.

One of the Ministry experts who presented the report on Tuesday, Erno Mähönen, crystallised its message by saying that while the sun is still shining, dark clouds are beginning to gather on the horizon.

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