Orsolya Soosaar, Economist at Eesti Pank 13.11.2015
The share of the working age population in employment has been higher than it was at the peak of the boom for four quarters now.
Slower GDP growth and faster growth in employment mean that productivity growth slowed in the third quarter and corporate profits shrank by more than before.
Statistics Estonia estimates put employment 4.3% higher in the third quarter of 2015 than a year earlier, and the unemployment rate at 5.2%. The share of the working age population either working or unemployed, which is the labour force participation rate, remained at the high level seen in the first half of this year and stood at 70.9%. The employment rate increased in all age groups and all regions.

Employment growth accelerated and seasonally adjusted unemployment fell substantially from the previous quarter. The share of the working age population in employment has been higher than it was at the peak of the boom for four quarters now. The unemployment rate was a little more than one percentage point lower then than it is now, but this was because labour force participation was lower.

The optimistic scenario in the labour force survey is counterbalanced however by some other sources of data that show employment growth slowing in the third quarter and unemployment climbing. Tax and Customs Board data on recipients of wage income paid out show that they have been fewer in number in monthly terms since the second quarter of the year. The number of declared recipients of wage income in September was probably lower than it was a year earlier. Data from Eesti Töötukassa, the Estonian unemployment insurance fund, show that the number of registered unemployed has been slightly higher than a year earlier since August. These divergences in estimates may have been caused by changes in labour market institutions, but they indicate that employment growth may be overestimated by the labour force survey.

The flash estimate from Statistics Estonia showing GDP growth to have slowed in the third quarter and the accelerating rise in employment together imply labour force productivity has fallen. Data from the Tax and Customs Board also indicate accelerating rises in wages, so corporate profits probably fell faster in the third quarter than previously in consequence.

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