The unemployment rate in Latvia for November 2025 was reported at 6.90%, up from 6.70% in August and February 2025, according to the Sigmanomics database. This figure also surpasses the market estimate of 6.70%, marking a notable reversal from the downward trend observed earlier this year. Over the past 12 months, the rate has fluctuated between 6.40% and 7.40%, reflecting ongoing labor market volatility.

Drivers this month

• Seasonal layoffs in manufacturing and construction sectors contributed 0.15 percentage points.
• Reduced hiring in export-oriented industries amid weaker external demand.
• Moderate wage growth failed to stimulate labor participation.

Policy pulse

The unemployment rate now sits above the central bank’s comfort zone, complicating the Bank of Latvia’s inflation targeting. Monetary tightening, with key rates raised by 75 basis points since mid-2025, may be cooling job creation.

Market lens

Immediate reaction: The EUR/LVL currency pair depreciated 0.30% within the first hour post-release, reflecting concerns over economic growth. Sovereign bond yields edged higher, with the 2-year yield rising 12 basis points, signaling increased risk premia.

Latvia’s labor market dynamics must be viewed alongside core macroeconomic indicators. GDP growth slowed to an annualized 1.20% in Q3 2025, down from 2.10% in Q2. Inflation remains elevated at 4.80%, pressuring real incomes. Wage growth averaged 3.50% year-over-year, insufficient to offset inflation’s bite. The labor force participation rate held steady at 63.40%, indicating limited slack absorption.

Monetary Policy & Financial Conditions

The Bank of Latvia’s monetary stance tightened amid persistent inflation. Higher interest rates have increased borrowing costs, dampening investment and hiring. Credit growth slowed to 3.10% YoY, the lowest since 2022, reflecting cautious bank lending and subdued demand.

Fiscal Policy & Government Budget

Fiscal policy remains moderately expansionary, with a 2025 budget deficit projected at 2.30% of GDP. Targeted labor market programs and subsidies aim to support vulnerable groups, but overall stimulus is limited by debt constraints. Public investment increased by 1.80% YoY, focusing on infrastructure and digitalization.

Drivers this month

• Seasonal employment declines in agriculture and tourism sectors.
• Export sector weakness due to slower EU demand.
• Labor market rigidities limiting rapid reallocation.

Policy pulse

The unemployment rate’s rise coincides with tighter monetary conditions, suggesting a lagged impact of interest rate hikes on employment. The central bank faces a trade-off between curbing inflation and supporting jobs.

Market lens

Immediate reaction: Latvian sovereign bonds saw a mild sell-off, with the 10-year yield rising 8 basis points. The local currency weakened slightly against the euro, reflecting investor caution.

Looking ahead, Latvia’s unemployment rate trajectory depends on several factors. A bullish scenario (30% probability) assumes easing inflation, stable external demand, and successful fiscal support, which could lower unemployment to 6.50% by mid-2026. The base case (50%) expects moderate growth and persistent inflation, keeping unemployment near 6.80–7.00%. A bearish scenario (20%) involves prolonged geopolitical tensions and tighter financial conditions, pushing unemployment above 7.20%.

External Shocks & Geopolitical Risks

Ongoing regional tensions and supply chain disruptions could dampen exports and investment. Energy price volatility remains a wildcard, potentially increasing production costs and limiting job creation.

Structural & Long-Run Trends

Demographic challenges, including an aging population and emigration, continue to strain the labor supply. Digital transformation and automation may reshape employment patterns, requiring policy adaptation to support workforce reskilling.

Latvia’s November 2025 unemployment rate signals a cautious labor market environment. The rise to 6.90% after recent declines reflects mixed economic signals amid tightening monetary policy and external uncertainties. Policymakers must balance inflation control with labor market support, while monitoring geopolitical risks and structural shifts. Financial markets have reacted with increased volatility, underscoring sensitivity to labor data. The outlook remains uncertain, with downside risks balanced by potential stabilization if inflation moderates and fiscal measures gain traction.

Since 2020, Latvia’s unemployment rate and the OMXH25 index have shown an inverse correlation. Periods of rising unemployment generally coincide with equity market dips, reflecting investor concerns over economic growth. For example, the 2024 unemployment peak at 7.40% aligned with a 12% drop in OMXH25 over six months. Conversely, unemployment declines to 6.40% in 2023 supported a 15% equity rebound. This relationship underscores labor market data’s importance for regional equity investors.

Latvia’s labor market shows signs of strain with the unemployment rate rising to 6.90%. Policymakers and investors should prepare for continued volatility, balancing inflation, growth, and social stability. The next quarters will be critical in determining if this is a temporary setback or a longer-term trend.