General labour market conditions in the EU and its Member States
Conclusions
In 2024 and early 2025, the EU labour market began to slow. After previously outpacing economic growth, employment growth started to align more closely with economic trends in the second half of 2024. Despite a pick-up in economic activity at the end of the year, employment growth slowed from high levels, slightly improving productivity growth, after a decline since mid-2022. Aggregate figures hide cross-country differences - with countries more specialised in manufacturing experiencing a stagnation or job losses. Unlike in the past, these losses no longer bring productivity gains in manufacturing, highlighting the need for improvements in services as well.
The recent changes in US trade policy may have a negative impact on employment. This could happen by increasing uncertainty, which may lead to delays in investment, hiring, and spending decisions, as well as through the direct effects of potentially higher tariffs on EU exports. The overall impact of a 15 percentage point increase in US tariffs on employment is estimated to be between 135 000 and 450 000 jobs with the effects being distributed unevenly across sectors and countries.
Labour market trends over the past decade have been broadly positive, with gains in high- wage, high-productivity jobs reflecting progress toward a more innovative, knowledge- based economy. The decline in low-wage, high-productivity jobs also signals improvements in education and productivity. However, the presence - and in some Member States the growth - of low- productivity jobs with low and medium wages remains a key obstacle to EU competitiveness. Many high- and medium-skill workers are employed in low-productivity sectors and low-wage occupations pointing to a utilisation of human capital that falls short of the needs of an innovation led growth model. Finally, low-productivity growth sectors of key importance for our society such as health and education remain essential to ensure a sustainable and dynamic economy, even if it is difficult to measure or achieve significant productivity gains because many tasks require personal interactions that are less susceptible to efficiency improvements. While technology can improve service quality (e.g. telemedicine, AI-assisted diagnostic or e-learning), it often may not lead to a decline in the amount of labour required to deliver these services, as efficiency gains are likely to also increase their demand. This implies that wages in these sectors must rise in line with the broader economy even when productivity lags.
Addressing these challenges and unlocking the full potential of the EU labour market requires coordinated action across multiple policy areas. While manufacturing is no longer the main driver of productivity growth, greater emphasis is needed on boosting efficiency in both manufacturing and services through innovation, digitalisation, new technologies, including AI, and skills development. In this context, strengthening the single market for services, particularly by facilitating cross-border service provision and enhancing competition, can be pivotal for driving productivity gains. Equally important are upskilling, improved job-matching, and vocational training. Moreover, investments in strategic sectors - such as defence and those linked to the Green industrial Deal - will strengthen the EU’s industrial base and manufacturing capacity, while also reducing strategic dependencies. Productivity growth depends not only on technology and investment, but also on cultural values and social norms. These foster social capital by building trust and cooperation, promote education and inclusion by ensuring equal opportunities. Policies that reinforce these norms —through public investment in education, healthcare, diversity, and community engagement— can strengthen cohesion and make economies more dynamic and inclusive.