The economic crisis had profound effects on labour markets of the EU member states in terms of a decline in employment and a rise in unemployment. This paper investigates how the states limited the impact of the change in economic output on the employment and the unemployment. The analysis suggests that there are different labour market institutions influencing the impact of the fall in GDP on the employment decline and unemployment increase. The first part of the paper explores and compares the extent to which the labour market institutions cushioned the impact of the economic crisis on the EU countries. The second part of this paper provides an in-depth comparative analysis of the labour market institutions and the adjustment mechanisms in Central Eastern European countries: Latvia, Slovenia and Slovakia. In the end this paper suggests that the specific institutional setting of a country, according to the Varieties of Capitalism, might shape the form of the government response to the crisis and the effect of particular institutions on the adjustment channels. The study shows that adjustment in Slovenia took place mostly within the firms, while in Latvia the most efficient adjustment channels actuated outside the firms, mostly within the government sponsored training programmes and international migration. In Slovakia, government sponsored adjustment, which focused on maintaining the existing positions, prevailed together with the promotion of self-employment.