LFS-based unemployment rate edges up to 5.2% in Estonia

The LFS-based unemployment rate edged up to 5.2% in Q3, up from 5.1% in Q1, figures of the statistical office, published on Wednesday showed. Despite the slight rise, the LFS-based unemployment rate is still rather low, at its second lowest level since this data series has been maintained (Q1’2007).

Meanwhile, the employment rate remained unchanged in quarterly terms at 68.2%, while the labor force participation rate inched up marginally to 72.0%. It is worth noting that the employment of older persons is at a record-high, as indicated by the stat office, which is likely attributed to the Work Ability Reform, in our view. In particular, the labor market participation of people in the age group 50-74 years reached 59.1% during the quarter, marking its highest level for the century.

All in all, labor market indicators have not changed significantly in Q3 compared to the same period last year. Still strong economic growth has continued to support labor demand. As a result, employment growth should continue to boost household consumption, which remains a key driver of GDP growth. Looking forward, we expect that the labor force might expand somewhat further, boosted by government measures aimed at the inclusion of disabled people and pensioners in the labor market (Work Ability Reform), which might lead to a slight increase of the LFS unemployment rate.

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