Labour force is declining

In the second quarter of 2014, employment declined by 1.2%, compared with the second quarter last year. The number of employed shrank by 8,000 persons in a year as a result of negative net migration and increased number of economically inactive (i.e. persons aged 15-74 not working or looking for a job).

In 2013, Estonia’s population declined by 2600 persons due to negative net migration, and additional 1700 persons as the number of deaths exceeded the number of births. In addition to quite large number of emigrants, around 25 000 persons are working outside Estonia (around 4% of the total employed).

The unemployment rate decreased to 6.9% as the number of unemployed declined but also because the number of economically inactive rose. The number of economically inactive grew mostly because the number of people not working due to health reasons increased.

Employment decreased the most in small service sectors as well as in agriculture and finance. The number of employed increased in construction, transportation and health sectors. Most of the construction workers are employed in the construction of buildings, where construction volumes are increasing, while the construction of civil engineering objects (and overall construction volumes) are declining. The same goes for transportation, where more labour-intensive branches of the sector are doing relatively better.

Estonian enterprises face strong wage growth pressure. In the first quarter of this year, personnel expenses of enterprises increased by 7.7%, when turnover decreased by 2.3%. Personnel expenses grew in most of the sectors, although sales performance was mixed. Preliminary figures show that labour market imbalances have somewhat eased in the second quarter as wage growth has slowed and GDP growth accelerated.

In the second half of the year, we expect employment to decrease compared with last year. Official employment figures will probably improve due to the new employee registration obligation since July this year.

Source: Swedbank

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