The labour market is doing well with low unemployment and increasing employment
Economist at Eesti Pank
Employment increased by 1.7% in the first quarter of 2019, while unemployment was at 4.7%, which is very low. Although a fall in confidence in foreign trading partners indicates the economy may be cooling, this has not yet had any notable impact on the Estonian labour market. The labour force survey shows that employment increased in the service sector and fell in the industrial sector.
Growing employment in services and falling employment in industry and construction is in line with sentiment surveys of employers. The good performance of the service sector is supported by rapid increases in incomes and strong confidence among consumers. The expectations of employers in the industrial sector for employment growth have become more pessimistic than earlier. However the growth in employment is probably underestimated by the labour force survey as industry and construction are two of the main sectors where short-term workers from third countries are employed, and these workers are not covered by the labour force survey.
Immigration eased labour shortages last year for the fourth consecutive year and the number of people of working age increased by a total of 0.4% over the year. More citizens of Estonia, other European Union countries and third countries arrived in Estonia than left. The labour supply was increased not only by people who moved to live permanently in Estonia, but also by short-term immigration that is not shown in the population statistics.
Moving forward, further growth in the employment of Estonian residents will be restricted because labour force participation and the employment rate are already very high. Estonia has for some time already been out in the lead in the European Union for these indicators. Furthermore the economic confidence index has fallen this year in Estonia and in Europe, giving reason to expect slower economic growth. Slower economic growth inevitably affects the labour market with something of a lag.
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