Growth in wages remained fast and reached 8.3% in the fourth quarter of last year. Wage growth slowed in the public sector, but was faster than expected in the private sector. There may be one-off factors behind this, but it could equally be an indicator that the people looking for jobs do not fit well with the needs of businesses looking for labour.

A weak economic climate and more people than the average looking for work usually indicate that wage pressures should be subdued, but wage growth in the private sector actually accelerated in the third and fourth quarters of 2024. This unusual development suggests there may be problems with the match between labour and the needs of businesses, which means that in order to hire workers with the skills needed companies must increase their wage offers. There may also be temporary factors behind it. Wage growth may have been affected in the short term by the rise in income tax, as some of the wages, bonuses and holiday pay that would otherwise have been paid in January may have been shifted to the end of December. A rise in the number of hours worked as the economy recovered may also have made a difference. Workers may also have been demanding larger pay rises in anticipation of the forthcoming rise in VAT.

Unemployment was 7.4% in the fourth quarter of last year, which was the same as in the third quarter. At the same time, data from the Tax and Customs Board show the number receiving a wage continued to fall. The number of people receiving a wage in the public sector has been rising, but that increase has now stalled. The number receiving a wage in a private sector is still falling, but at a slower rate. There was good news in manufacturing, which suffered a lot from the recession but saw the number of people receiving a wage rise little in the final months of the year. Employers in manufacturing have also become more optimistic about employment in the near future.

The recession ended in early 2024 and GDP was up over the year by 1.2% in the fourth quarter, but demand for labour has not yet shown signs of a decisive recovery. The employment rate is at a historically high level, as fewer jobs were cut during the recession than in earlier episodes, and changes in economic activity reach the labour market after some delay.

Additional information:
Hanna Jürgenson
Eesti Pank
Communications Specialist
Tel: 5692 0930
Press enquiries: [email protected]