Unemployment rose in the third quarter

Orsolya Soosaar

Economist at Eesti Pank

  • Data released today put the unemployment rate higher in the third quarter than it was in the second quarter
  • Jobs have been created most in the service sector since 2010
  • A reduction may be expected in the rate of growth of labour costs, which has outstripped GDP growth for some time

Figures from Statistics Estonia show unemployment rose to 7.5% in the third quarter of 2016 as the labour market participation rate rose, but the employment rate fell. The number employed was 1.2% lower than a year earlier, with the fall coming more in the public sector than the private sector. It should also be noted that the estimate of employment was exceptionally high in the third quarter of last year.

Data released today put the unemployment rate in the third quarter of 2016 higher than it was in the second quarter and also higher than in the third quarter of 2015. Unemployment was notably higher in Ida-Virumaa, where a large part of the economy depends on the oil shale sector. Data from Töötukassa show registered unemployment in Ida-Virumaa rose over the year, though by substantially less than the labour force survey found, while the unemployment rate has been falling since March 2016.

The share of those aged 15-74 who were in employment was 66.5%, which surpasses the pre-crisis peak from 2008 by 3.5 percentage points. The number of people in employment has risen at almost the same rate in both rural and urban regions, and in all areas of Estonia except Ida-Virumaa, where the employment rate was higher in 2007 than it is now. The employment rate for the under-50s is slightly lower than it was before the crisis, but the rate for the over-50s is significantly higher. Waged employees have a much lower risk of falling into relative or absolute poverty than the unemployed or the inactive, and so a higher employment rate indicates an improvement in the living conditions of households.

Jobs have been created most in the service sector since 2010, while employment in the industrial sector has remained lower than it was before the crisis. The number of employees in services has risen more in the private sector than in the public sector. This year, institutions and companies of the state and local authorities employed one quarter of all those in work.

A fall in employment means that the rate of growth of labour costs, which has outstripped GDP growth for some time, should start to come down. High employment and low unemployment have so far supported the position of employees in wage negotiations and helped to make wages rise faster. If the supply of available labour increases though, it should reduce the pressure on wages.

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