LFS unemployment rate rises to 6.8% in Estonia

The LFS unemployment rate rose from 5.3% in Q4 2017 to 6.8% in Q1 2018, according to figures of the statistical office, published on Tuesday. The number of the unemployed increased notably by 23.4% y/y, following a decline of 17.5% y/y in Q4. The increase was attributed to people looking for jobs, who have previously been inactive. Meanwhile, employment growth decelerated to 0.6% y/y after in the previous quarter it reached its highest growth rate since Q4 2011. The labor force expanded by 1.9% y/y amid the 4.2% y/y decline in the number of inactive people, underpinned by government measures aimed at the inclusion of disabled people and pensioners in the labor market. The employment rate came in at 66.6%, down by 1.8pps q/q after it marked a 20-year high in Q4 2017. The labor force participation rate stood at 71.4%, showing an upward trend, having increased by 1.2pps y/y. In annual terms, activity rose most notably in the 15-24 age group – up by 3.3pps y/y, while in the 50-74 group it rose by 2.1pps y/y.

All in all, figures are in line with our expectations that the LFS unemployment rate will increase somewhat due to the entry of previously inactive people in the labor market, many of whom will need some time to adjust and get a new job. In addition, we expect that employment growth is likely to ease down somewhat this year, affected by the expected slowdown of economic growth and the notable rise of labor costs.

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