Swedbank: Recession leads to a moderate increase in unemployment

SwedbankIn the third quarter, Estonia’s labor market was still strong. The number of the employed set a record, amounting to 680,000 persons, up by 3.4% in a year. The number of the employed increased in the private sector but remained stable in the public sector. Over the year, the number of the employed grew mainly in the services sector.

The registered unemployment rate has increased modestly so far, reaching 7.6% in mid-November. Ukrainian refugees made up 12.5% of the registered unemployed.

The expected recession will affect the labour market. Demand for labour is expected to decline. The number of vacancies has already decreased. The increase in the unemployment rate will remain moderate, however, as the economic downturn should be mild and short-lived. The layoffs are mainly expected in the manufacturing sector.

The increase in unemployment should alleviate labor shortages somewhat. However, wage growth is expected to remain rapid. Swedbank forecasts an 8.5 percent increase in the average gross wage next year. Wage growth is supported by the shortage of skilled workers, higher minimum wage, wage increases in the public sector, and strong wage pressure from workers who do not want their standard of living to drop significantly due to skyrocketing inflation.

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