Weak economic growth has reduced employment

Orsolya Soosaar
Economist at Eesti Pank

Annual growth in employment slowed in the third quarter to 1.1% according to Statistics Estonia. The assessments this year do not take account of the reduction in the working age population caused by migration and changes in the age structure of the country, so in fact employment probably fell in annual terms. In seasonally adjusted terms employment was also down on the previous quarter.

Such a decline was expected, given several quarters of weak economic growth and rapid wage growth. Faster growth in labour costs is unsustainable over a longer term and is often accompanied by an adjustment in the number of workers or in wages. This suggests that developments in employment in the coming quarters will depend on the flexibility of wages and working hours. However, a broad-based decline in employment is unlikely. The resurgence of export markets will help Estonian economic growth accelerate gradually, and will allow the labour force to be again deployed efficiently.

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