Demand for labour remained strong in the second quarter
- The labour market indicators remained good in the second quarter
- The employment expectations of companies improved and they felt labour shortages more sharply
- The unemployment rate rose to 7%,
- Growth in productivity accelerated
The Labour Force Survey shows a fall of 0.5% in the number of people employed in Estonia in the second quarter of 2017 and a rise of 0.5 percentage point in the unemployment rate to 7%. The change is not large compared to typical statistical variation, suggesting that conditions remained good in the labour market in the second quarter.
The share of people of working age who were in employment was 66.9%, and most data sources show strong demand for labour. Registry data from the Tax and Customs Board show an increase of 0.9% in the number of people declared as receiving a wage in the second quarter, driven by the private sector. The confidence survey of the Estonian Institute of Economic Research shows that companies have improved their employment expectations, and the share of the companies questioned considering labour shortages to be a factor limiting production increased. Employment expectations have particularly increased in the construction sector, where the restriction of labour shortages is also particularly felt. Households also became more optimistic and fears of increased unemployment have declined sharply during 2017.
Statistics Estonia puts the unemployment rate at 7%, which is 0.5 percentage point higher than in the second quarter of last year. Although health is keeping about the same number of people out of the labour market as a year ago, the rise in the unemployment rate probably reflects the effect of the work ability reform. Data from Eesti Töötukassa, the Estonian unemployment insurance fund, show that the number of registered unemployed with reduced ability to work approached 10,000 and a further rise in this number is expected. The data indicate that some 7% of people with reduced ability to work found work each month in 2017. The rate of finding jobs was, as expected, somewhat lower than the rate of 12% for those with full ability to work. Unfortunately around 7% of those registered with Töötukassa leave the register of their own volition or because they cannot meet its conditions. As this also means losing work ability benefit, the reasons behind this and how people are subsequently able to cope need to be analysed.
Labour productivity has now been growing for a year and the increase picked up even further in the second quarter according to data on industrial output and exports. More efficient organisation of work allows companies to improve their profitability even if wages continue to rise as quickly as they have been doing.