Unemployment is not expected to contract very fast
Natalja Viilmann, Eesti Pank, economist
According to Statistics Estonia, the number of the employed continued to shrink also in the first quarter of 2010. The amount of the employed decreased by 26,900 quarter-on-quarter, with the number of jobs contracting by 15,000 in construction and by 13,800 in industry. It is possible the situation in the construction sector was somewhat influenced by the cold winter and also by seasonality, but the total number of the employed nevertheless shrank more than forecast.
Employment decreased 9.6% year-on-year, which is considerably faster than the pace of economic downturn (2.3%). This refers to rapid productivity growth and restructuring of production.
Labour market indicators have so far followed economic developments with a lag of an average two quarters. As a result, the continuation of unemployment growth in the first quarter came as no surprise. Eesti Pank expects the labour market situation to start improving in the second half of the year.
In addition to shrinking employment, the increase in the number of the unemployed was also affected by the declining amount of the inactive - their number decreased by 7,300 on the previous quarter. The number of both the discouraged and those who are inactive due to their studies contracted, which means the likelihood of finding a job picked up.
Monthly statistics show that the first signs of an economic recovery have already started to impact labour market indicators: the number of new jobs is on the increase and the accrual of new registered unemployed is inhibiting.
The total number of the unemployed was exceptionally high in the first quarter - 136,900 people - and according to Eesti Pank's forecast, the unemployment rate will remain high in 2010.
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