The objective of this paper is to test how the local economic structure (local sectoral specialization and diversity, competition, average firms size and total employment density) affects the 2004-2006 local employment growth in 379 administrative regions of Poland. In particular, we estimate a reduced form equation as in Combes (2000) for four different sectors of economy (agriculture, hunting, forestry and fishing, industry and construction, market services, non-market services). We find evidence for both MAR and Jacobs externalities in the services sectors. Industrial sectors tend to be influenced only by MAR externalities. Furthermore, we examine and find the issue of spatial correlation in our data. Hence, spatially lagged and error models are used with no major change in the overall effects. Moreover, we learn that even for very short periods of time, dynamic externalities tend to be helpful in terms of explaining changes in local employment growth. To the best of our knowledge, this is the first study of this kind to analyze both industrial and services sector of Eastern European economy.