Govt forecasts rise of unemployment until end of 2026

The expected recovery of the employment rate will be delayed by the labour market downturn in autumn 2024 and long-term unemployment is projected to increase until 2026, according to labour market forecast published by the Ministry of Economic Affairs and Employment on Tuesday.

The labour market forecast used Statistics Finland's new population projection, which indicates that immigration will rapidly expand the size of the working-age population in the next few years.

According to the forecast, the number of employed people will grow by 14,000 in 2025 and by another 27,000 in 2026.

This strong growth in the working-age population combined with cyclical weakness will push down the employment rate in the coming years.

The forecast suggested that the employment rate of the working-age population (15–64-year-olds) will fall by 1.4 percentage points to 72.2 per cent this year.

A slight decline is also expected next year, but the employment rate is forecast to return to 72.2 per cent in 2026.

The unemployment rate is forecast to rise this year by 1.2 percentage points to 8.4 per cent. It is expected to rise again to 8.5 per cent next year but return to 8.4 per cent in 2026.

Pressures on the public sector to save money will offset the positive development in employment in healthcare and social welfare and in public administration.

For private services, however, the outlook is brighter. Employment in the construction sector will recover slowly, and an upturn is not expected until the end of 2025.

The number of unemployed jobseekers registered with employment services will continue to increase, but the growth is expected to halt next year. The number of long-term unemployed, however, is predicted to keep rising until the end of the current forecast in 2026.

The number of unemployed jobseekers this year is estimated at an average of 288,000, which is 28,000 more than in 2023. Their number is expected to rise to 302,000 in 2025 and then fall to 294,000 in 2026.

The number of long-term unemployed people is expected to reach 93,000 this year, increasing to 106,000 next year and to 112,000 in 2026.

Unlike in other regions, unemployment is on a particularly favourable trend in Lapland where the decrease in the number of unemployed jobseekers is expected to continue in the next few years.

The short-term labour market forecast of the Ministry of Economic Affairs and Employment is based on a statistical time-series analysis. It makes use of Statistics Finland’s Labour Force Survey, unemployment statistics, national accounts statistics, demographic statistics and the Ministry of Finance’s economic forecast.

The forecast is published twice a year.