General labour market conditions in the EU and its Member States
Introduction
In 2023, EU economic growth came to a standstill, as a result of tightening financial conditions, the weakening of trade flows and high, albeit declining, inflation rates.
Economic activity decelerated sharply in the first half of the year. Gross domestic product (GDP) growth expanded by 0.1 % in the third quarter and stagnated in the fourth quarter, avoiding a technical recession (defined as two consecutive quarters of negative growth) by a narrow margin; growth in the euro area followed a similar pattern. On a yearly basis, growth dropped from 3.4 % in 2022 to 0.4 % in 2023 (from 3.5 % to 0.4 % for the euro area) (Table 1.1).
In 2024, the EU economy is expected to perform better.
In the first half of 2024, economic growth gained momentum with GDP expanding by 0.3 % in the EU and the euro area in both the first and second quarters. Annual GDP growth in the EU is projected to reach 0.9 % in 2024 and improve to 1.5 % in 2025. Geopolitical tensions and the persistent inflation in the United States are near-term downside risks for inflation and economic growth, while private consumption and external demand are expected to support growth. The labour market is expected to remain strong with unemployment hovering around its historically low rate of 6 % in both years.
Table 1.1:Unemployment, compensation per employee and GDP growth in the euro area and the EU
Note:
(1) For the unemployment rate changes are in percentage points (pps). For GDP, Q2 2024 data refer to Eurostat flash estimate. EA: euro area. Q1: first quarter; Q2: second quarter; Q3: third quarter; Q4: fourth quarter.
Source:
Eurostat, National accounts, and Labour Force survey: (une_rt_q; namq_10_gdp) (namq_10_a10_e) (prc_hicp_manr) and (prc_hicp_mmor).
This chapter reviews the recent labour market developments.
Section 1.2. covers key labour market developments in the EU and its Member States. Section 1.3. analyses the main drivers, including labour demand, labour supply and the process of matching vacant jobs with job seekers. Section 1.4. puts the current developments into perspective by discussing the sustainability of low unemployment without addressing the major challenges of low productivity growth and labour and skills shortages . Section 1.5. discusses the implications for policy and Section 1.6. concludes.