LFS unemployment drops significantly to 5.2% in Estonia

The LFS-based unemployment rate dropped significantly from 6.8% in Q1 to 5.2% in Q2, reaching its lowest level since Q2’08, according to figures of the statistical office, published on Tuesday. The number of the unemployed persons fell by as much as 26.9% y/y. Still, despite the notable decline, the number of the long-term unemployed increased slightly with 7,600 people having been looking for a job for two years or longer, the stat office noted.

In terms of the labor force, it remained unchanged in annual terms, but expanded by 0.6% q/q. On another positive note, the employment rate came in at 68.2%, higher by 1.3% y/y, although the increase was mainly on account of part-time employment and as many as 8,000 people who worked part-time indicated they are underemployed. The labor force participation rate remained rather stable and went up to 71.9% in Q2, down by merely 0.1pps compared to Q2’17, when it reached its highest level for the past 20 years.

All in all, labor market figures remain favorable, supported by robust economic growth and strong labor demand. Employment growth should continue to boost private consumption, which has been a key driver of GDP growth. Looking ahead, 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, which might lead to a slight increase of the LFS unemployment rate.

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