The labour market reflects rapid economic adjustment

Martin Lindpere, Eesti Pank, economist

According to Statistics Estonia, the number of the employed in the first quarter was 44,000 smaller year-on-year. The number of the unemployed increased by 50,000, raising the unemployment rate to 11.4%.

The labour market has promptly responded to the steep decline in Estonia's economic volume, which started at end-2008. Withering economic activity has forced enterprises to align the amount of their employees with lower demand. In order to support economic revival, output per employee needs to start growing again. Practice has shown that Estonia's enterprises cut labour costs mostly by reducing workforce, but also by curtailing wage costs.

The number of the unemployed grew markedly at the start of the year on account of manufacturing, which has suffered a severe setback due to the global economic crisis. Registered unemployment will continue to increase in the near future due to the ongoing economic adjustment processes, but its growth rate is expected to decelerate.