Unemployment rose in September – experts explain why economic growth has not been reflected in the labor market

The unemployment rate shows what share of people in the labor force do not have a job but are seeking one. It is a percentage, so it relates unemployment to the size of the labor force. In September, Finland’s unemployment-rate trend figure was 10.5 percent.

The number of unemployed jobseekers is a separate count from municipal employment services. It records people registered as jobseekers, not a percentage. At the end of September, their number was nearly 325,000, five percent higher than a year earlier. The figures come from different statistical systems and definitions.

The distinction matters because the labor force has grown. More people who were previously outside the labor force began looking for work. They then appeared as unemployed jobseekers rather than outside the labor force, making unemployment numbers look worse even though participation in the labor market increased. Neither measure alone gives the whole picture.

Finland’s labor market weakened clearly in September compared with the same month a year earlier. The number of unemployed people increased by 39,000. At the same time, the number of employed people aged 15 to 74 decreased by 11,000. These changes point in opposite directions: more people lacked work, while fewer people had jobs.

The trend figure for the unemployment rate rose to 10.5 percent. Municipal employment services also recorded more unemployed jobseekers. Their number reached nearly 325,000 at the end of September, five percent above the level a year earlier. This confirms that the deterioration was visible in more than one measure.

The figures were surprising because Finland’s economy had started growing. Gross domestic product increased 0.4 percent from the previous quarter, and exports rose 5.7 percent. However, the article notes that monthly employment figures can fluctuate considerably, so one month does not establish the entire future trend.

Economic growth and employment do not always move together immediately. Companies may first use existing staff, increase production, or wait for stronger demand before hiring. After a long weak economic period, employers can remain cautious, especially when uncertainty surrounds the world economy and business conditions. That delays the effect of growth on unemployment.

Finland’s GDP grew 0.4 percent from the previous quarter, and exports increased 5.7 percent. Yet the recovery was driven mainly by exports and industry. The article explains that industry does not employ as many people as the service sector. At the same time, more people entered the labor force and began actively seeking work, which increased the number recorded as unemployed.

The result was a temporary mismatch: output improved, but hiring lagged and the pool of jobseekers grew. The Ministry’s forecast expected an average unemployment rate of 10.2 percent this year, while the Bank of Finland saw stronger improvement beginning mainly next year.

The composition of economic growth matters for hiring. Growth led by labor-intensive services can create many jobs, while growth led by industry and exports may raise output with fewer additional workers. This helps explain why Finland’s economy expanded even as employment weakened.

Exports increased by 5.7 percent, and GDP grew 0.4 percent from the previous quarter. The Bank of Finland’s Juuso Vanhala described the recovery as strongly export- and industry-focused. He noted that industry does not employ as many people as service sectors. Thus, stronger export performance did not automatically produce broad recruitment across the labor market.

Hiring was also restrained by uncertainty and the long preceding downturn. Companies were cautious about recruiting, according to Jukka Appelqvist of the Central Chamber of Commerce. Employment may therefore improve only when growth becomes broader, demand strengthens, and firms decide that higher activity will last. The Bank of Finland expected clearer unemployment improvement mainly during the following year.

Men were affected more severely because employment weakened in industries where men are strongly represented. The article identifies construction as a major example. Residential construction had been effectively frozen for a long time, reducing demand for workers. Industrial recruitment also remained weak in some branches.

In September, Finland had 59,000 fewer employed men than a year earlier. By contrast, the number of employed women increased by 48,000. The contrast suggests that employment changes were closely connected to the sectors where workers are concentrated. Construction and parts of manufacturing were under pressure, while the article does not identify a similar broad decline in women’s employment.

Industrial conditions were mixed. Metal-industry order books had recovered strongly, but paper manufacturing showed no clear positive sign. The uneven recovery means that employment may improve at different speeds across sectors. Men working in construction and affected industrial fields therefore faced the darkest situation in the figures discussed.

Long-term unemployment means that people remain without work for an extended period. Its growth matters because prolonged unemployment can make it harder for workers to return to jobs. The article describes the trend as worrying and says that a larger long-term unemployed group becomes increasingly difficult to reduce.

Finland had 143,000 long-term unemployed people in September. That was nine percent more than a year earlier. This increase occurred while overall unemployment was also rising. It shows that the problem is not limited to newly unemployed people; some workers are staying out of employment for longer.

If the trend continues, the labor market recovery may become slower and more difficult. Companies may still be cautious about recruitment, while the number needing help grows. The article does not give a specific policy solution or timetable for reversing long-term unemployment. It does indicate that an expanding long-term unemployed population is a serious concern for future employment improvement.

Employment figures reflect several moving parts. The labor force grows when people who were previously outside it start looking for work. If they do not immediately find jobs, they are counted as unemployed. Employment improves only when employers hire enough people to absorb both these new jobseekers and those already unemployed.

Finland illustrates this mechanism. More people, including over-55s and young students, entered the job search. At the same time, employers were cautious after a long weak cycle and amid global uncertainty. Economic growth was concentrated in exports and industry, which employ fewer people than services. Therefore, production rose without creating enough jobs quickly.

The economic cycle also creates a delay. GDP grew and exports strengthened, but the labor market had not yet caught up. The Bank of Finland considered a 10.4 percent average unemployment rate realistic this year and expected more vigorous improvement only from the following year. Timing depends on broader growth and stronger recruitment.