General labour market conditions in the EU and its Member States
Labour market developments in the EU and its Member States
Despite sluggish economic growth in 2023, the labour market remained strong.
After a temporary dip in the second quarter of 2023, employment growth rebounded on a quarter-on-quarter basis reaching 0.3 % in the third quarter and 0.2 % in the fourth quarter (0.2 % and 0.3 % for the euro area). Yearly employment growth declined slightly from 1.3 % in the fourth quarter of 2022 to 1.1 % in the fourth quarter of 2023, still above pre-pandemic levels (Table 1.1 and Graph 1.1 a and 1.1 b). Consequently, over 2.6 million jobs were created in the EU in 2023 (2.4 million in the euro area). By the last quarter of 2023, the employment rate (20-64) hit a record of 75.5 % (74.9 % for the euro area), and the activity rate rose to 80.2 %, up by 0.7 percentage points (hereafter pps) compared with the previous year (75.5 % for the euro area). This good labour market performance also continued in the first half of 2024, with the employment rate reaching 75.8 % in the second quarter of 2024 (75.3 % in the euro area).
Graph 1.1: (a) Employment, GDP, hours worked and productivity in the EU in % and (b) annualised growth rates for GDP, employment and productivity in periods of positive GDP growth
Note:
(b): average annualised growth rates over the period, excluding quarters when GDP was negative quarter on quarter. This excludes recessions, defined as two consecutive quarters of negative growth. For the unemployment rate is in pps changes. Q1: first quarter; Q2: second quarter; Q3: third quarter; Q4: fourth quarter.
Source:
Eurostat, National accounts, GDP and main components (output, expenditure and income) (namq_10_gdp) and Employment by A*10 industry breakdowns (namq_10_a10_e).
The rise in employment has not been accompanied by an increase in the hours worked per worker.
The recovery of hours worked per person employed has been only partial following the significant drop during the pandemic recession. By the end of 2023, hours worked per worker were about 1 % lower than in 2019, representing a 4.5 hours annual decline per person since the pandemic; the drop is more pronounced in the euro area, where hours worked fell by 1.6 % over the same period, corresponding to a 6-hour annual decrease. Most of this reduction was driven by changes within specific groups, while the growing share of the service sector and the higher proportion of women in employment played a more limited role. The reduction in hours worked is a common pattern across sectors, with more significant declines in the euro area particularly in wholesale and retail trade, transport and hospitality, as well as information and communication technology (ICT) and finance and professional and technical services. This decline primarily reflects workers’ preferences .
Graph 1.2: Unemployment rate in the EU
Note:
Prediction based on Okun's law over the period Q2 2001-Q42019. Q1: first quarter; Q2: second quarter; Q3: third quarter; Q4: fourth quarter.
Source:
European Commission based on Eurostat data.
The unemployment rate is lower than predicted based on GDP growth.
In September 2024, it stood at a record low of 5.9 % (6.3 % in the euro area), unchanged for almost two years (Table 1.1), compared with 6.5 % in the fourth quarter of 2019 (7.4 % in the euro area). Consequently, the number of unemployed people in March 2024 was 13 million, one million fewer than in December 2019. The unemployment rate was 0.6 pps lower than anticipated based on the statistical relationship between unemployment and growth (Graph 1.2) . This better-than-expected performance is driven by favourable labour supply and labour demand conditions, but also reflects a more persistent decline . Unlike past crises, where unemployment remained persistently high, the rise during the COVID-19 pandemic was also limited and short-lived across all age groups (see Graph 1.19 in the Annex) .
In 2023, the labour market performed well in nearly all EU Member States.
Employment growth exceeded the 2001-2019 trend by 2 pps in nine countries but fell short in eight (Graph 1.3 a). Employment rates showed upward convergence over time, with more significant increases in countries with low pre-pandemic rates (Graphs 1.3 c-d). The unemployment rate declined in 12 Member States in 2023, while it increased in 14, notably Denmark, Estonia, Finland, and Sweden. Despite this, unemployment rates remained at historical lows in most Member States and continued to diminish in many of them in early 2024 (Graph 1.3 b). Consequently, the dispersion in unemployment rates within the EU decreased, nearing the low level seen before the 2008-2009 crisis by early 2024 (Graph 1.3 c). This upward convergence mainly reflects declines in Greece and Spain, which were less affected by the energy crisis than many other countries, although their unemployment rates remain above the EU average.
Graph 1.3: Selected labour market indicators
Note:
Unemployment rates are harmonised, seasonally adjusted monthly figures (une_rt_m). Employment rate (20-64), (lfsi_emp_a); M1: January; M2: February; M4: April; M5: May; M7: July.
Source:
Eurostat, National accounts (namq_10_gdp); Labour Force Survey (LFS); Job Vacancy Statistics (JVS).