Unemployment decreased further

• In Q2, employment up by 1.7%, yoy, and unemployment rate down to 6.5%.
• In 2016, employment is expected to fall a bit.

Estonia’s labour market tightened further in the second quarter, but at a slower space. The annual growth of employment slowed from 2.9% in Q1 to 1.7% in Q2. The number of inactive and unemployed declined compared to last year. The inactivity decreased the most among the retirees and those studying at school or university. Unemployment rate decreased to 6.5% in the second quarter (7.0% in Q2 2014).

The Estonian Unemployment Insurance Fund’s data shows that unemployment has declined at a slower space in recent months. Seasonally adjusted figures show even a slight increase in unemployment in Q2. Unemployment rate has reached a level where an additional decline of the rate is already difficult. There are around 44 000 unemployed in Estonia currently, out of which 11 000 have been looking for a job for more than 2 years. The number of people who have become unemployed recently, has grown. Some sectors, who face weak export demand and low output prices, find it hard to keep up with current wage growth.

Employment will grow this year due to the labour registration obligation, which will push up official employment statistics in the first half of the year. Also, strong consumption supports employment in the services sector. In 2016, employment is expected to fall a bit because of a lower supply and demand of labour. More expensive labour encourages investment in machinery. Some enterprises might decrease the number of employees because of low (export) demand, i.e., agriculture and specific sectors of the manufacturing industry. Unemployment rate is expected to remain low, however, although it might increase marginally next year due to decreasing working-age population and problems in certain sectors.

Source: Swedbank

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