Swedbank: Higher employment and lower unemployment rate

  • SwedbankLabour market has become even tighter.
  • Employment increased by 2.2% and the unemployment rate decreased further to 5.8% in 2017.

Last year brought good news for Estonian employees. Higher economic activity lifted demand for labour. Employment increased by 2.2% and the unemployment rate decreased further to 5.8%. Employment rose mostly in the services sector and in Tallinn due to a decrease in the number of the inactive and the unemployed. The employment rate reached 67.5% and the labour force participation rate 71.6%.

When the total unemployment rate decreased, the registered unemployment rate is still on the rise. The Estonian Unemployment Insurance Fund’s data show an increase in the number of the unemployed due to the work ability reform (that motivates people with a disability to look for a job) and, recently, due to an administrative reform merging local governments into bigger units.

A shortage of labour was the most important factor restricting business for 20% of manufacturing, 29% of service companies and for 40% of construction companies in January. The rate of job vacancies, i.e., the share of job vacancies in the total number of jobs, increased to 2.3% in the third quarter. The rate of job vacancies was the highest in education, tourism, and IT. Employees feel more and more secure in the labour market. The number of employees who have left their jobs on their own initiative has been growing in recent years. Therefore, wage pressures will persist. Tax data show that gross wage growth accelerated in the fourth quarter.

We expect employment to increase slightly next year as demand for labour grows. At the same time, the supply of labour is limited, so the number of job vacancies should grow. The unemployment rate is expected to increase due to the labour market reform (people with disabilities amounted to 30% of the registered unemployed in January).

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