The crisis is receding in the labour market. The unemployment rate declined to 5.7% in the third quarter.- The unemployment rate is still relatively high, but the lack of suitable labour is a growing concern. 40-50% of employers report labour
- shortage as their main business constraint.
The unemployment rate fell more than expected
According to Statistics Estonia, the unemployment rate declined quite significantly in the third quarter, to 5.7%. The total number of the unemployed amounted to 40,000 in the third quarter. The number of the registered unemployed at the Unemployment Insurance Fund (Töötukassa in Estonian) was 6,000 persons higher than the Statistics Estonia’s estimate. The difference between the two figures could result from those who receive unemployment benefits but still work unofficially or from statistical discrepancies between the survey and registry data.
Rapid economic growth continued in the third quarter. This lifted demand for labour. The number of the employed grew by 0.9 percent or by 6,000 persons in a year in the third quarter. The increase in employment came from the services sector.
Labour shortages are acute
Demand for new employees has increased significantly in both industry and services. 40-50 percent of entrepreneurs see labour shortage as their main business constraint. Such a large labour shortage, with a still relatively high unemployment rate, shows the matching problem in the labour market, in terms of skills but also geographical location. Therefore, we expect the unemployment rate to decline at a relatively slow pace, although economic growth will remain strong also next year.
Labour shortages and rising minimum wages keep wage growth rapid
Swedbank estimates that the average gross wage will increase by almost 6% this year and by 6.5% next year. The rise in the average net wage will be barely faster than the rise in consumer prices this year. Next year, however, the average net wage will rise somewhat more than prices.
