The labor market has held up well despite the protracted recession. The unemployment rate increased during the winter months but is now decreasing again.
The unemployment rate rose to 7.8% in the first quarter, similar levels seen during the first wave of the coronavirus in 2020. First quarter’s data is close to our expectations. We expect the unemployment rate to reach 7.5% in 2024 and then decline to 6.7% in 2025.
Unemployment increased due to the unfavourable economic situation and the inflow of Ukrainian refugees. Ukrainians amount to 4.4% of the population by now. In the first quarter, the turnover of companies was 5% lower than a year earlier. The number of employees has decreased in the manufacturing sector, construction, and transportation – sectors that have seen the largest drop in sales.
The public sector shows rapid wage and employment growth. While wages and employment have grown the fastest in health care, both indicators are significantly up also in education and public administration.
Although Ukrainian refugees have adapted quite well to life in Estonia, the unemployment rate among them is 25% or four times higher than among the Estonians. Due to their limited knowledge of the Estonian language, refugees often take low-paid jobs. Therefore, the average wage of refugees is 40% lower than the country’s average.
In the spring, the situation in the labor market has improved. Registered unemployment rate is decreasing, and employment is increasing. However, the number of employees is still below the level of the previous year and the year before. Entrepreneurs are hesitant to recruit new people, especially in the private sector. The survey by the Estonian Institute of Economic Research shows that most companies do not plan to hire more stuff in the coming months. Only tourism and IT companies plan to increase the number of workers. The amount of job advertisements has increased compared to winter but remains well below last year’s level.
