The recession in the economy is increasingly impacting the labour market
Economist at Eesti Pank
Data from Statistics Estonia show that unemployment in Estonia rose to 7.3% in the third quarter, as an estimated almost 55,000 people in Estonia were out of work. The employment rate declined a little, but a record proportion of the working age population were participating in the labour force.
Demand for labour is being weakened by the economy remaining persistently weak for a long time. Employment in industry and construction is lower than it was in the third quarter of last year both in the labour force survey released by Statistics Estonia and in the data from various registers. Services have been doing better than industry, but register data show that employment has stopped growing in services and is now static. Employment is down though in some branches of services like transportation and storage, and administrative and support activities.
Employment has so far held up well given that the economy has been in recession for a year and a half, but downturns often hit the labour market after some delay. This is indicated by the more pessimistic expectations of employers for future developments in employment, and by the fall in the number of job vacancies registered with Töötukassa. Flexibility in wages is important if jobs are to be preserved, as wage pressures should ease when the economy is weak and unemployment is higher. Large wage rises in the public sector and a major increase in the minimum wage will however reduce this flexibility both directly and indirectly.