Times are still good in the labour market

Orsolya Soosaar
Economist at Eesti Pank
  • The labour market remained very favourable for employees in the third quarter
  • The unemployment rate fell to 5.2%, falling most in Ida-Virumaa
  • The economy grew in the third quarter thanks to high employment, but the growth in productivity slowed

Statistics Estonia calculates that employment was 2% higher in the third quarter of 2017 than a year earlier, and there were almost one third fewer unemployed. Some 72% of people of working age participated in the labour market, which is similar to the figure for the third quarter of last year. Of these labour market participants, 5.2% were without work, which was notably fewer than in the third quarter of last year, when the number of jobs in the oil shale sector dropped. The steepest fall in the unemployment rate from last year was in Ida-Virumaa.

Several data sources showed as increased demand for labour and serious shortages of staff. Data from the Tax and Customs Board show the number receiving wage income to be around 1% higher than a year ago, which is a little below the figure from the labour force survey. Data from Töötukassa however indicate a rise in the number of registered unemployed, but this can be explained by a rise in the number of people in the register with reduced work ability following the Work Ability Reform. There are discrepancies in the figures because it is not compulsory for the unemployed in Estonia to register with Töötukassa. The number registered as unemployed has stood throughout the past year at 70% of the number estimated as unemployed by the labour force survey. There was a marked increase in the third quarter in the share of companies in manufacturing and construction that consider labour shortages to be the main factor restricting their expansion.

The productivity of labour increased strongly in the first half of this year, but this was partly because of temporary factors like a recovery in the energy sector. The economy grew in the third quarter because work was being done by more people, but the productivity of labour probably did not increase as fast as in the first half of the year. Data from the Tax and Customs Board also indicate faster rises in wages, so the increase in corporate productivity probably slowed in the third quarter.


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