The remarkable performance of the EU labour market over the past years is strong testimony to the efforts made by the Member States to preserve our social model in a rapidly changing world. The job market has shown significant resilience, with robust employment growth and historically low unemployment. These achievements are particularly noteworthy given modest economic growth, accelerated structural transformations and mounting geopolitical tensions.
Executive Vice-President Roxana Mînzatu
Social Rights and Skills, Quality Jobs and Preparedness
The EU labour market, which has been remarkably resilient over the past years, has started to slow.
In recent years, the EU labour market has shown remarkable resilience, with strong employment growth and historically low unemployment rates, despite weak economic growth and ongoing structural transformations. However, in 2024, the labour market showed signs of deceleration, with employment growth slowing to 0.8% from 1.2% in the previous year. Moreover, the recent shift in US trade policy is expected to adversely affect employment, both through heightened uncertainty and the imposition of higher tariffs on EU exports. The impact of tariff hikes is estimated to be unevenly distributed across sectors, reflecting their different exposures to the US market. Pharmaceuticals are likely to face the largest relative job losses, while wholesale and retail trade are expected to experience the greatest absolute employment decline.
Real wages grew faster in the EU in 2024, and despite some moderation, they are expected to exceed their 2019 levels in 2025 in most Member States.
After years of strong growth, the EU labour market has started to slow. In 2024, employment growth decreased to 0.8%, from 1.2% a year earlier. Amid rising global pressures, major restructuring events have occurred in key industries like automotive, telecommunications, electrical equipment and pharmaceuticals. Countries with large manufacturing sectors were hit hardest. Trade tensions are creating more uncertainty for the EU economy and employment.
Promoting adequate wages, a key component of job quality, remains high on the political agenda. One reason is that, although real wages bounced back in 2024 (+2.7%), they are still slightly below pre-COVID-19 levels, by 0.7%. Wage growth is being held back by low productivity growth, economic uncertainty and less tight labour markets.
Job retention schemes played a crucial role in protecting jobs and incomes during the COVID-19 pandemic. The widespread use of these schemes reflects not only their swift implementation by Member States, but also the crucial role of financing from the EU’s temporary Support to mitigate Unemployment Risks in an Emergency (SURE) instrument. As the EU economy faces elevated uncertainty, owing to geopolitical tensions and restructuring processes due to the green and digital transitions, Member States’ job retention schemes may once again prove essential to preserving employment. Lessons learnt from the implementation of such schemes during the pandemic, combined with insights from economic theory, can inform their design and deployment in response to future economic shocks.
Chapter 1
As productivity in manufacturing slows, the EU economy is increasingly relying on the services sector to sustain productivity growth. Tackling low productivity growth requires faster technology adoption and a stronger focus on innovation and knowledge-driven activities, supported by a better use of workers’ skills. Since 2012, there has been a strong rise –by nearly one-third– in high-skilled, better-paid jobs in high-productivity growth sectors. Instead, the share of low-skilled, lower-paid jobs in manufacturing and retail have declined, often replaced by automation. However, not all workers are moving into better jobs. Nearly one-third of them are still active in low- to medium-wage jobs, in sectors like transport, hospitality and domestic services, which have experienced limited productivity gains over the last decades. The fact that many highly educated people are working in these jobs may signal an inefficient use of human capital.
Structural shifts in employment - cumulative change in percentage points for each group in the EU
Source:
Own calculations based on LFS and SES.
Chapter 2
Promoting adequate wages, a key component of job quality, remains high on the political agenda. One reason is that, although real wages bounced back in 2024 (+2.7%), they are still slightly below pre-COVID-19 levels, by 0.7%. Wage growth is being held back by low productivity growth, economic uncertainty and less tight labour markets.
Real wage changes (%) compared with pre-pandemic levels (2019), 2024 and 2025
Chapter 3
Participation rates are relevant because of their relationship with the number of jobs saved, already evident in 2020. The experience of the pandemic shows that broad access for firms and workers to job retention schemes, combined with simplified administrative procedures, was correlated with higher participation rates and helped preserve employment in the medium term. By contrast, some conditionalities, such as mandatory training or dismissal bans, were associated with lower participation rates.
Relationship between take-up rates (Q2 2020) and number of jobs saved in % (2020)
Conclusions
In 2024 and early 2025, the EU labour market began to slow.
Conclusions
Real wages in the EU have broadly recovered their pre-pandemic levels, but their growth is constrained by structurally weak productivity developments.
Conclusions
Job retention schemes have proven to be an effective policy response to economic crises arising from sudden and unexpected shocks.
