Unemployment rate (as calculated as the share of unemployed in the economically active population) in Estonia amounted to 8.1% in Q2, report by Statistics Estonia shows. Unemployment rate declined as compared to 10.2% seen in Q1 and Q2/12. Number of unemployed decreased by strong 19.7% y/y to an estimated 57,000 people as of end of Q2.

Most notably the long-term unemployed declined by 9,000 people or 24% y/y, showing the fastest decline in the previous quarters. The number of long-term unemployed stood at 28,000 people. At the same time the proportion of long-term unemployed to the total number of unemployed did not change much – it amounted to 49% vs. 46% seen in Q1.

The youth unemployment rate declined to 16% in Q2 vs. 23.1% in Q1/13 and 24.4% in Q2/12.

To remind, in 2012 overall unemployment stood at 10.2% the lowest in four years and down from 12.5% in 2011.

The Bank of Estonia commented that employment growth of 3.3% seen in Q2 has intensified inflationary pressures. The CB notes that despite a modest economic growth this year total employment is 63% which is very close to the pre-crisis level.

At the same time employment growth strongly exceeding output growth points to a decline in labour productivity. This risks the increase of the widening wage-productivity gap and labor costs passing on to prices.

Bank of Estonia previously believed that employment slowdown that started in H2/12 is likely to continue in H1/13, due to manufacturing industry pressured by low external demand and long winter postponing the start of construction works.