"Unemployment falling to 3.9 percent in the third quarter was definitely surprising. The data on registered unemployment rather exhibits an upward trend for this period. On the other hand, labor market statistics have been able to positively surprise analysts for years by consistently indicating a lower unemployment rate than projected," Nestor told BNS.

SEB projects unemployment will grow to 5.8 percent next year. Nestor said that the projected increase will above all be prompted by weak economic performance of industrial exporters  and the need to cut labor costs.

"On the other hand, unemployment today is very temporary in its nature as there are a number of companies in the market that haven't been able to recruit as many employees as needed," Nestor said, adding that continued labor shortage combined with slower economic growth over the coming years will further enhance wage growth at the expense of businesses' profits.

The unemployment rate in the third quarter was 3.9 percent, labor force participation rate 71.9 percent and employment rate 69 percent, according to Statistics Estonia. The estimated number of employed persons was 677,300, which is 10,700 more than in the same quarter of the previous year.

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