The labour market situation remains uncertain



 Orsolya Soosaar, economist at Eesti Pank

Unemployment increased to 7.1% in the second quarter of 2020 and employment decreased by 3.6% year-on-year. The decline in employment was due to the service sector, which suffered the most because of the coronavirus and the measures introduced to prevent it. Though the labour market has been showing signs of a recovery in recent months, the outlook remains uncertain.

Several more frequent data sources indicate that the situation in the labour market has stabilised in recent months, but it is still much weaker than before the crisis. Data from the register of employees show that the number of employment relationships fell by 3% year-on-year by the end of May, but the figure has been improving since then. However, the situation may appear to be somewhat better than it actually is because of the impact of wage compensation, since its conditions make redundancies within one month after receiving the compensation very expensive.

Registered unemployment has also been stable since June – compared to the period of the emergency, there are fewer new registered unemployed people and the likelihood of finding a new job has increased. The survey results of the Estonian Institute of Economic Research show that companies’ employment expectations have been improving since April and the number of vacancies offered through the Unemployment Insurance Fund is also recovering.

In spite of the positive developments in recent months, the outlook for the labour market is still uncertain. It usually takes time for companies to make decisions concerning their employees and several fields of activity that have been hit hard by the coronavirus crisis are facing a low season. The greatest risk continues to be related to further spread of the virus and measures taken to prevent it.

For further information:

Hanna Jürgenson

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