General labour market conditions in the EU and its Member States
Conclusions
The EU labour market has remained resilient despite subdued growth in 2023 and early 2024.The unemployment rate has stabilised at around 6 % since May 2022. However, signs of cooling off have emerged such as a declining job vacancy rate and fewer firms reporting labour shortages since early 2023. Insufficient demand has become the main reason firms are not expanding production. Nevertheless, the labour market remains tight, with several indicators performing better than the pre-pandemic average. Looking ahead, the European Commission Autumn forecast suggests that the employment is set to continue its growth, though at slower pace, with the unemployment rate staying at its historically low level. While the low unemployment rate means that the labour demand is strong, the available supply will be insufficient to fill all vacant positions. This implies that the labour market might remain tight.
Recent labour market trends point to a good performance, yet underlying challenges persist related to low productivity growth and widespread labour and skills shortages.Low productivity growth undermines competitiveness, pushing firms to rely on cost-cutting strategies rather than innovation. Persistent labour and skill shortages may delay technology adoption, raise costs, and reduce labour demand. In the short term, shortages can lead firms to retain their workforce, which may hinder labour reallocation over the medium term. To achieve sustainable economic growth and finance the European social model, it is essential to boost productivity growth. This is particularly important given the rapid ageing of the labour force.
Addressing these challenges require concerted efforts across multiple policy areas, ensuring sustainable economic growth and resilience.Encouraging investments in research and development (R&D) and in digital and energy-efficient technologies can unlock new opportunities for productivity gains. Reforming education and training systems to better align them with labour market needs is essential for upskilling and reskilling the workforce and fostering the adoption and diffusion of new technologies. Enhancing workforce adaptability will help to sustain the current low unemployment rates and facilitate the shift of labour toward high-productivity growth sectors. In the context of an ageing population, harnessing the potential of underrepresented groups in the labour market and attracting talent from non-EU countries, particularly in EU-wide shortage occupations, will be critical to maintain sustainable growth and resilience.