OREANDA-NEWS. August 18, 2011. Against the backdrop of recent quarters' rapid economic growth, the Estonian labour market has shown sufficient flexibility in enabling manufacturers to comply with increasing demand in the domestic and the external market, reported the press-centre of Eesti Pank.

Thanks to the dynamic economic expansion, employment showed the fastest growth of recent years in the second quarter of 2011. According to Statistics Estonia, the number of the employed increased by 44,000 (7.8%), year-on-year, in the second quarter. This is the most intensive job creation in Estonia's history. The general number of the employed was 602,600 people.

Manufacturing, construction and trading created the most of new jobs. Rapid added value growth on account of labour productivity continued in the manufacturing sector, which leads the way in the exporting sector. Approximately a fifth of the employment growth can be attributed to the return of the former inactive to the labour market, which is why also the labour market participation rate has increased to one of the highest levels in recent years (to 67.5% among those aged 15-74).

Rapid job creation cut the general number of the unemployed by 36,000 over the year, whereas 8,000 formerly inactive people entered the labour market. Compared to the second quarter of 2010, the unemployment rate dropped from 18.6% to 13.3%. The general number of the long-term unemployed declined, whereas the amount of the discouraged and people who have been unemployed for a very long time increased.

According to Eesti Pank's forecast, the rapid employment growth will slow in longer term. On the one hand, the rapidly grown demand will decline and on the other hand, supply will be constrained by the lack of necessary skills and qualification. Since risk of growth in unit labour costs may reappear, it is important to observe the ratio of productivity and wage growth. Labour market flexibility is gaining more and more importance in respect of labour force mobility, working time and wage setting. The more flexible the labour market, the faster the drop in unemployment.