The unemployment rate increased moderately in the second quarter but has been stable since then.- We expect the unemployment rate to reach around 8% this year and then decrease again next year.
According to Statistics Estonia, employment fell by 3.6% in the second quarter, over the year, mostly in the services’ sector, and among the youth, aged 15-24. The unemployment rate grew to 7.1% (5.1% in Q2 2019). Around a fifth of the employed participated in the government’s wage-support scheme.
Estonia’s economy has weathered the corona crisis quite well so far. The registered unemployment rate shows that the unemployment rate has not increased further in July-August. Employment expectations show an additional reduction of the labour force in the manufacturing industry (where problems started already before the virus hit), while the demand for labour in the services and construction sector has stabilised.
We expect the unemployment rate to grow moderately in autumn, as government support programmes and banks’ payment holidays come to an end, while uncertainties and low export demand persist. Employment decreases also due to a smaller number of foreigners working in Estonia (foreigners have substantially contributed to employment growth in recent years). We expect the unemployment rate to reach around 8% this year and then decrease again next year. Swedbank expects wages to grow by only 0.5% this year (without the public wage support scheme). In the second quarter, wage growth slowed to around 4%, over the year, including the wage support scheme, according to the Tax Authority.
