Analytics, Banks, Employment, Estonia, Financial Services

"The coronavirus crisis swept 24,000 people, equal to the population of Polva County, off the job market. The hardest hit were young people of ages 15-24 active in the field of services. According to Statistics Estonia, the rate of unemployment reached 7% in the second quarter. Without the support of the state, joblessness would be bigger stilI. One-fifth of the employed received the remuneration compensation," Elmik said.

According to the economist, registered unemployment in Estonia has been stable in the summer months. The proportion of overdue loans in banks' loan portfolio continues to be very low.

It is still primarily industrial companies that are planning to cut employee numbers, whereas in services and construction demand for labor has stabilized, Elmik said.

"This is also normal, as in industry difficult times began already before the coronavirus crisis. In services the situation is improving and in construction it continues to be good," Elmik said.

"The wage support and loan repayment moratoriums are coming to an end, whereas insecurity and downturn on the foreign markets persist. A certain number of companies will not be able to handle the strain and must lay off employees. This does not mean, however, that unemployment has disappeared -- it is still difficult to find good specialists in specific areas," she said. 

Elmik pointed out that employment was declining also as a result of negative dynamics in the employment of foreigners, who are contributing less to the Estonian economy this year than in previous years.

She said that according to Swedbank's estimate, the rate of unemployment for 2020 should be 8%.

Economic difficulties and the rise in unemployment are also easing wage pressures.

"Consumers are less confident on the labor market and in wage negotiations and anticipate the increase in unemployment to continue. In the second quarter, wage growth inclusive of remuneration compensation slowed down to 4%, according to the Tax Board," the economist said.

According to the forecast by Swedbank, the average gross wages and salaries in Estonia will grow by just 0.5% this year, leaving aside the wage compensation. Wage growth apparently will decelerate more in the private sector than in the public sector. The situation of households will be eased by the halting of inflation, as the consumer basket of an average Estonian will not become more expensive this year.

Statistics Estonia said on Friday morning that the labor force participation rate in Estonia in the second quarter of 2020 was 70.4%, the employment rate was 65.4%, and the unemployment rate was 7.1%. Unemployed persons numbered 49,400, 14,400 more than in the first quarter of the year.