Bank of Esonia: Resuming economic growth will also start stabilising the labour market

According to preliminary data, productivity per employed person grew by 1.8% year-on-year in the last quarter of 2009. Since employers have widely used such measures as decreasing working hours and cutting wages, the number of jobs declined to a lesser degree in 2009 as a whole compared to the extent of the economic contraction.

Although the recovery of demand should reincrease the amount of job offers, the number and distribution of the employed across fields of activity will not rebound in the near future. The recreation of jobs is unlikely in the construction sector, but since exports are picking up, it can be forecast that the number of the employed will increase in manufacturing. However, with both production capacity and labour resource strongly underutilised, there will be no extensive creation of jobs this year.

According to Eesti Pank's earlier forecast, the number of the unemployed will continue to rise also in the first half of 2010. When the crisis hit, labour costs were cut relatively swiftly and extensively, but the response will be slower in the economic recovery stage: productivity will increase first and then working hours and wage funds will start growing.

The Labour Market Review prepared in January 2010 is available on the website of Eesti Pank

Source: Bank of Estonia