Dynamism that had characterised the EU labour market from the mid-1990s also continued in 2007. EU employment grew by 1.8 %, the highest rate since 2000.
At the same time, the ratio of employment to working age population rose to a peak of 65.4%. Net job creation was particularly robust in Poland, the Netherlands, Slovenia and Germany. The strong gains in employment mainly reflected the creation of more stable payrolls, with permanent employment accounting for about 80% of total employment growth.
The unemployment rate reached in July 2008 the historically low rate of 6.8 percent (7.3% for the euro area). This improvement was fairly uniform across different age groups.
The strong growth of employment has been associated with an increase in labour supply, which, in turns, reflects an increase in the participation rate - to 70.5% – as well as in the working age population, the latter mainly driven by the remarkable expansion of non-nationals. The labour market improvements observed so far are also a sign that structural reforms have started to pay-off. Even so, there is a labour supply potential in the EU that needs to be activated.
Employment developments can usually be expected to weaken with a lag compared to GDP growth. In light of the downward revisions to the growth projection, the outlook for the employment situation has turned less favourable. For the near term, this view is supported by the recent marked deterioration in the survey data concerning employment expectations of businesses and households.