Estonian labor market situation better than initially forecast

While joblessness in Estonia remains at a comparatively high rate, with over 50,000 people searching for work, the situation on the labor market at the turn of the year was better than initially feared, and, assuming no other unforeseen events take place, the picture could have improved significantly further still by year-end.
The latest Unemployment Insurance Fund (Töötukassa) statistics show that, as of Tuesday, 56,116 people in Estonia were actively looking for work. The registered unemployment rate meanwhile stands at 8.4 percent.
Meelis Paavel, Unemployment Insurance Fund director, said the job market in Estonia is now at a slightly better level than it had been in 2021, following a round of job losses in the wake of the coronavirus.
There may be some further improvement soon, he said.
"If you look at the trends, the second half of March should see this graph move somewhat downwards," Paavel said, meaning that unemployment should fall a little.

Kaspar Oja, an economist with the Bank of Estonia (Eesti Pank), meanwhile said that the initial unemployment data for the fourth quarter of last year (Q4 2023) had been better than the central bank had forecast. "The labor market has performed much better than we expected," he said.
However, Meelis Paavel argued that, cognitively speaking, people will continue to have a hard time of it in the labor market. They are tending to hold on to their jobs rather than change them.
Paavel found that people need more than a wage rise of around €100 per month as an inducement for changing workplaces.
Arto Aas, head of the Central Confederation of Employers (Tööandjate Keskliit) does not see the labor market situation as being particularly rosy just yet.
Aas noted there have now been eight consecutive quarters of economic contraction, and while there are no objectively clear signs of green shoots of recovery to accompany the final weeks of winter, fatigue has set in among employers and others, over the economic picture.

The Bank of Estonia had forecast at the end of last year that this year's unemployment rate will be nine percent. This also means that if unemployment should decrease at the end of the year, unemployment should also reach over 10 percent in the spring if the scenario proposed by the central bank is fulfilled.
Meelis Paavel also reported that layoff rates have fallen since January, to three collective redundancies this month, admittedly only halfway through the month, at three companies, one of them an NGO, in relation to 44 jobs.
Paavel counselled against companies making layoffs "too lightly," arguing that the fact is that there is a labor shortage in Estonia overall, with many sectors actively seeking staff.
Arto Aas found one consolation in a greater response rate to job vacancy advertisements, and also noted that there is a greater labor mobility in the IT and tech sector than has been seen for around a decade.
Not all companies may actually be reading from the same page with regard to layoffs, he added, with some holding on to employees in the hopes that things get better, and others not.

Demand from key export partners Finland and Sweden does not seem to be picking up yet, however, Aas added, though said there was no cause for a "major panic," as the situation is not as it was during the last major crash a decade-and-a-half ago.
The situation would likely improve somewhat at the end of this year, he said.
Kaspar Oja at the Bank of Estonia meanwhile sees the first signs of improvement, pointing to the rise in industrial production seen between November and December last year, a fall in spare production capacity in industry, and the numbers of people searching for work.
While the figures on-year still point to a decline in production, on month, increases have been observed, making it important to watch how the early part of this year continues to pan out.
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Editor: Andrew Whyte