2021 would be a lost year for the economy and for job creation in Finland. Unless the Government is wrong and the forecasts of its Ministry of Employment are not met.
According to the latest labor market forecast published Tuesday by the Ministry of Economic Affairs and Employment, the coronavirus pandemic will continue to destroy jobs during this year and the next (2021), and the difficulties will extend until 2022.
These official forecasts reflect the existing uncertainty about the effects of the epidemic on economic development.
The Ministry's forecast says the unemployment rate (7.7% in the third quarter of 2020) is projected to rise to 8.2% in 2021 and then fall to 7.8% during 2022.
During the baseline forecast - that is, if the crisis did not worsen unexpectedly - the number of people employed in Finland will decrease by a total of about 76,000 during the current year and the next.
Employment will only "start to grow slowly in 2022", though there will be still about 60,000 fewer people employed than before the crisis, the document states.
Amid this gloomy scenario, the employment rate is projected to be 71.6% in 2022, well bellow the pre-crisis levels and far from the target set by Sanna Marin's government (75%).
The ministry said the number of temporary layoffs is also expected to remain high until at least the next summer (2021).
Increasing long-term unemployed
In the government's forecast, the average number of unemployed jobseekers is projected at 342,000 in 2020, which is 101,000 more than in 2019. The forecast for 2021 is 317,000 and 297,000 for 20222.
The number of long-term unemployed is projected for 75,000 this year, which would be 11,000 more than in 2019. But the increase will not stop for now: 107,000 long-term unemployed are foreseen for 2021 and up to 113,000 for 2022.
The number of unemployed under the age of 25 is projected at 44,000 by 2020, which is about 13,000 more than in the previous year. The forecast for 2021 is 38,000 and 35,000 for 2022.
Labor force shrinking
The labor market forecast also looks at the supply of labor. The number of the Finnish working-age population (aged 15-74) is forecast to decline significantly in 2021, which will cause long-term challenges for the Finnish labor market.
However, the government expects that immigration will maintain the supply of labor in the main working-age groups (between 25 and 54 years).
The coronavirus crisis has reduced labor supply and increased hidden unemployment. According to the forecast, "prolonged layoffs are reflected in hidden unemployment, which reduces labor supply."
The pandemic is also expected to have a negative impact on labor supply and labor force participation in 2021.