Labour market is recovering

The Estonian economy recorded growth for the fourth consecutive quarter, which has helped stabilise the labour market and restore the demand for labour.

Based on Statistics Estonia, employment continued to grow in the third quarter of 2010. The number of jobs increased by 25,000 from the first quarter to 578,200. New jobs were primarily created in manufacturing, construction and retail, which are the sectors with largest cuts in jobs in the previous periods. Although seasonal factors played a big role in employment growth and the number of jobs in manufacturing and construction is still lower than it was a year ago, the data for the third quarter suggest that employment grew from the second quarter despite the seasonal factors. Employment was 3.3% lower than it was in the third quarter of 2009, but the pace of employment contraction has clearly slowed.

The rise in economic activity and the declining number of employees, in annual terms, indicate a rapid increase in productivity. Based on preliminary estimates, labour productivity grew 8.5% in the third quarter in annual terms. Economic growth is primarily driven by the recovery of export growth, which is why manufacturing sector productivity increased the most.

The unemployment rate dropped to 15.5% in the third quarter. The total number of unemployed was still very high at 105,900 people, but it has shrunk by 31,000 over the past six months, which is a relatively rapid change. However, this indicator is not expected to continue dropping rapidly in the winter months; the fall in unemployment will speed up again in the second quarter of 2011.

The unemployment rate has decreased partly because of the improved situation of the young in the Estonian labour market. As many of the new jobs were created in manufacturing and construction, the situation of men and non-Estonians in the labour market improved the most. The percentage of part-time workers declined in the third quarter, meaning that labour resources were used more intensively.

The percentage of long-term unemployed in total unemployment increased in the third quarter. The number of people unemployed for one or two years dropped by 4,000 from the second quarter, while the number of people unemployed for a very long time, that is more than two years, increased by 1,500. The very long-term unemployment rate stood at 20,800. The last time this indicator was this high was at the end of 2004. At the same time, the number of discouraged did not grow, totalling 8,000 in the third quarter, which is lower than it was a quarter of even a year ago.

Unit labour costs fell further and profitability increased in the third quarter. Although the average wage payment increased year-on-year, the change in the wage fund in annual terms was lower than economic growth, as the number of salaried workers continued to decline.

 Source: Bank of Estonia

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