Estonia’s labour market is tightening

• The unemployment rate decreased to 7.4% in 2014.
• Employment increased by 0.6%.

By sectors, employment grew the most in transportation and storage, tourism, ICT, and public sectors. The number of employees decreased in administrative activities, manufacturing, agriculture and finance.

The potential pool of additional labour is shrinking. The working-age population and the number of unemployed both decreased by 9000 persons in 2014. The employment rate of the working-age population (63.0%) increased to a rate last seen during the previous peak of the cycle in 2008. The employment rate has increased because employment has grown but also because the working-age population has decreased and the retirement age has been raised.

Finding additional labour among the economically inactive people (retired persons, students, persons inactive due to health reasons, etc.) is also becoming more difficult. The number of economically inactive decreased by 3000 persons in 2014. Among them, the number of pensioners and the number of people on maternity leave or studying decreased the most. At the same time, the number of persons inactive due to health reasons increased.

Labour shortage is the most important constraint in increasing one’s production volumes for 18% of enterprises in the service sector, for 8% of enterprises in the manufacturing sector, and for 3% of companies in the construction sector, according to a survey by the Estonian Institute of Economic Research in January.

Employment is expected to decrease marginally this year because of lower supply of and demand for labour (the latter thanks to investment in higher efficiency). Shale oil and food industries will probably reduce their labour force after the recent dramatic drop in the prices of oil, and lower prices and smaller export volumes of food products. But so far, the impact of smaller revenues in these sectors on total employment has been limited (around 0.05% of employment).

 

Source: Swedbank

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