Flash comment: Estonia

Economic commentary by Economic Research Department Feb.14, 2013

Unemployment rate continued to decrease in the 4th quarter of 2012

Labour market indicators, %
70 68 66 64 62 60 58 56 54 52 50 2007 2008 2009 2010 2011 2012 Participation rate Unemployment rate (rs) Employment rate 0 5 10 15 20 25

According to Statistics Estonia, the unemployment rate decreased from 12.5% in 2011 to 10.2% in 2012 which was the lowest of the last four years. Unemployment rate in the 4th rd quarter of 2012 decreased to 9.3% from 9.7% in the 3 quarter. Employment rate grew from 59.7% in the 4th quarter of 2011 to th 61% in the 4 quarter of 2012. Mostly domestically oriented sectors, such as education (mainly pre-school education and training events) and administrative and support service activities (mainly buildings maintenance), contributed to the growth. Whereas in the export oriented manufacturing, which is battling with contracted external demand, employment decreased. Together with the deceleration of the output growth in construction in the second half of last year, employment decreased marginally also in this economic activity. As economic growth was faster than employment growth both in the 4th quarter and annually, the labour productivity per employee increased.

Employment expectations, pts

40 30 20 10 0 2010 -10 -20 -30 -40 industry retail construction services

Outlook
2011 2012 2013

Although unemployment rate decreased for the third quarter in a row, the growth of employment has decelerated and due to the labour deficit it will likely decelerate even further. Unemployment rate has reached close to its natural level and will stay that way for this year as well. More rapid decrease in unemployment rate may lead to increased wage pressures, contribute to the price growth and influence negatively Estonias competitiveness.
Tnu Mertsina Chief Economist +372 888 7589 tonu.mertsina@swedbank.ee

Swedbank Economic Research Department SE-105 34 Stockholm, Sweden ek.sekr@swedbank.com www.swedbank.com Legally responsible publisher Magnus Alvesson +46 8 5859 3341

Flash comment is published as a service to our customers. We believe that we have used reliable sources and methods in the preparation of the analyses reported in this publication. However, we cannot guarantee the accuracy or completeness of the report and cannot be held responsible for any error or omission in the underlying material or its use. Readers are encouraged to base any (investment) decisions on other material as well. Neither Swedbank nor its employees may be held responsible for losses or damages, direct or indirect, owing to any errors or omissions in Flash comment.