LFS unemployment rate rises to 7.5% in Q3 in Estonia

The LFS unemployment rate rose to 7.5% in Q3, compared to 6.5% in Q2 and 5.2% in Q3 2015, data published by the stat office showed on Monday. Thus, the unemployment rate recorded its highest level since Q2 2014. The average registered unemployment rate stood at 4.2% and thus the gap between the registered and the LFS unemployment rose to 3.3pps from 1.1pps a year ago.

The number of unemployed people increased by 44.9% y/y. This partly reflected a significant increase of the labor force participation by disabled people due to the reorganization of the social benefits system as of June. Moreover, the continuing strong wage growth also stimulated the labor force participation. Therefore, the labor force rose by 1.2% y/y and the labor force participation rate recorded a new historic high of 71.9%. The number of employed people dropped by 1.2% y/y affected by the weaker economic growth since the beginning of the year. Considering that the economic activity is expected to strengthen and the economic sentiment reported noticeable improvements recently, we expect to see an increase of employment in the coming quarters.

The finance ministry expects the unemployment rate to stand at 6.2% this year, while the employment growth should equal 0.9%. Meanwhile, the EC expects the 2016 unemployment rate to come in at 6.5%, while the IMF puts the figure at 5.5%.

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