Flash comment: Estonia - November 14, 2016
Employment down and unemployment up
• Employment decreased by 1.2%, over the year, in the third quarter.
• The unemployment rate jumped to 7.5% in the third quarter.
• Employment is expected to marginally decline and the unemployment rate to grow in 2017.

Changes in the third quarter’s labour market data were larger than expected. Employment decreased by 1.2%, over the year. Employment declined in the construction, energy, and manufacturing industries. The construction sector has been hit by lower volumes of infrastructure construction. The energy sector has had to reduce output due to low energy prices. In the second quarter, the decline in the employment in the secondary sector was offset by a strong growth in the employment in services. In the third quarter, the number of employees in the services’ sector was only marginally higher than one year before.

Employment is expected to marginally decline in 2017. Working-age population is shrinking and surging labour costs motivate organisations to increase the efficiency of their production processes. Employment in the construction sector should increase, though, as the volume of public construction projects is expected to grow substantially next year. The outlook of the energy sector should also improve as the price of oil is expected to gradually move higher.

The number of inactive decreased by 3.5%, over the year, in the third quarter. Major drivers of this decline, in addition to the tight labour market, were an increase in the retirement age and rearrangement of the social benefits system regarding people with disabilities; these people are now entitled to certain benefits only if they work or actively look for work. The unemployment rate increased to 7.5% in the third quarter (5.2% in the third quarter of 2015). 53,000 people were actively looking for a job; around half of them had been seeking employment for less than 6 months. At the end of October, there were 5,000 people with reduced working ability looking for a job through the Estonian Unemployment Insurance Fund. As many of them might find it hard to find a suitable job, the unemployment rate is expected to grow next year.

For more information about this report, please contact Ms. Liis Elmik, liis.elmik@swedbank.ee, +372 888 7206.
This letter is distributed by Swedbank in cooperation with Brightly. The letter is personal.