Archive:Labour market slack - unmet need for employment - quarterly statistics

Data extracted in October 2021

Planned article update: January 2021

Highlights

In the EU, the unmet demand for employment reached 14.2% of the extended labour force in the fourth quarter of 2020, from which less than half, 6.9%, were unemployed.

In the fourth quarter of 2020, the EU labour market slack is 1.3 p.p higher compared to the fourth quarter of 2019, differences amounted to +4.1 p.p. in Estonia and +3.2 p.p. in Ireland.

In Italy, Ireland and the Netherlands, potential additional labour force and underemployed part-time workers together amounted to more than 60% of the total national slack, while unemployment stood at less than 40% in the fourth quarter of 2020.

An individual is considered unemployed if he/she fulfils the International Labour Organisation criteria that are precisely being without work, available to start working within two weeks and having actively sought employment. This means that only referring to unemployment might underestimate the entire unmet demand for employment, also called the labour market slack, especially during the health crisis. To better reflect this unmet demand, the labour market includes, in addition to unemployed people, part-time workers who want to work more, people who are available to work but do not look for work, and people who are looking for work but are not immediately available.

This article is based on quarterly and seasonally adjusted Labour Force Survey (LFS) data. It investigates the labour market recovery with respect to the COVID-19 crisis on the overall labour market slack and provides an overview of its specific components. This article presents both the European and country approaches, demonstrating the impact of the COVID-19 crisis at a global EU level as well as at national level in the respective Member States as well as in three EFTA countries (Iceland, Norway and Switzerland) and three candidate countries (North Macedonia, Serbia and Turkey).

This article is part of the online publication Labour market in the light of the COVID 19 pandemic - quarterly statistics alongside the articles Employment, Employed people and job starters by economic activity and occupation

Full article

Concept and EU overview

Labour market slack refers to the total sum of all unmet employment demands and includes four groups: (1) unemployed people as defined by the ILO, (2) underemployed part-time workers (i.e. part-time workers who want to work more), (3) people who are available to work but are not looking for it, and (4) people who are looking for work but are not available for it. While the first two groups are in the labour force, the last two, also referred to as the potential additional labour force, are both outside the labour force. For this reason, the “extended labour force”, composed of both the labour force and the potential additional labour force, is used in this analysis. The labour market slack is expressed as a percentage of this extended labour force, and the relative size of each component (each of the four groups) of the labour market slack can be compared by using the extended labour force as a denominator.

Figure 1 depicts the evolution of the slack and all of its components from Q1 2008 to Q4 2020 (for people aged 15-74) in order to better capture the concept and provide a first overview at EU level. In the fourth quarter of 2020, in the EU, the slack accounted for 14.2 % of the extended labour force, corresponding to 31.4 million persons. Unemployed people stood for a bit less than half of the slack, with 6.9 % of the extended labour force (15.3 million persons). The remaining part of the slack referred to persons available to work but not seeking it (3.7 %) that encompassed 8.1 million persons, underemployed part-time workers (2.9 %), 6.4 million persons, and persons seeking work but not immediately available (0.7 %) that corresponds to 1.6 million persons.

Figure 1: Components of the labour market slack, EU, Q1 2008-Q4 2020
(people aged 15-74, in % of the extended labour force)
Source: Eurostat (lfsi_sla_q)

Consecutive decreases in the unmet demand for employment recorded in the third and fourth quarters of 2020 do not outbalance the strong increases recorded in the first and second quarter of 2020

In terms of developments since the beginning of the COVID-19 crisis, labour market slack increased from 12.9 % of the extended labour force to 13.4 % (+0.5 percentage points (p.p.)) between the fourth quarter of 2019 and the first quarter of 2020. This increase was primarily due to an increase in the number of people who were available to work but were not looking for work (+0.4 p.p.), while unemployment remained stable.

Consecutively, from the first to the second quarter of 2020, a similar pattern emerged, but to a greater extent: labour market slack reached 15.1 %, a record high in 2020 (+1.7 p.p. compared to the previous quarter), and, once again, an increase in people available to work but not seeking (+1.5 p.p.) primarily explained the change in labour market slack. In comparison, unemployment increased by 0.2 p.p., the number of the underemployed part-time workers increased by 0.1 p.p. and the number of persons looking for a job but not available decreased by 0.1 p.p. during the same period. People who were unemployed at the time may have reconsidered their job search for a while due to the shutdown or slowdown of many businesses or due to health measures.

In the third quarter of 2020, the labour market slack has significantly decreased since the partial restart of activity (-0.6 p.p.). In addition, in the slack composition itself, there were also major changes. Indeed, between the second and the third quarter of 2020, people appeared to resume looking for work: unemployment rose significantly (+0.6 p.p.) and the share of people available to work but not looking fell dramatically (-1.2 p.p.) while the other components remained relatively stable.

Unmet demand for employment decreased by 0.3 p.p. between the third and fourth quarter of 2020, owing primarily to a decrease in the proportion of unemployed people (-0.2 p.p.).

In short, the decreases in the unmet demand for employment recorded in the third and fourth quarters should be considered as regards the spike reached in the second quarter of 2020. These decreases far from compensate the significant growths recorded in the first and second quarter of 2020.

For further details, the article on Key figures on the impact of the COVID-19 crisis on the labour market reports on the changes in the slack with respect to employment and people outside the extended labour force. This gives a complete picture of the changes that occurred in the labour market on these aspects and provides a large focus on young people, the most affected by the COVID-19 crisis.

Country comparison in Q4 2020

Shares of people with unmet demand for employment exceed 20 % of the extended labour force in Spain, Greece and Italy

Among EU Member States, Spain, Greece, and Italy recorded the highest slacks, reaching more than one fifth of the extended labour force in the fourth quarter of 2020 (see Figure 2), 25.1 % in Spain, 23.5 % in Greece and 21.9 % in Italy. Those countries also recorded the biggest gender gaps observed in the slack: 29.6 % for women against 18.4 % for men in Greece (gender gap of 11.2 p.p.), 30.4 % for women against 20.4 % for men in Spain (gap of 10.0 p.p.) and 26.5 % for women against 18.3 % for men in Italy (gap of 8.2 p.p.). The labour market slack of women exceeded that of men in all EU Member States except in Estonia and Bulgaria (same shares for men and women) and in Lithuania where the unmet demand for employment of men (12.0 % of the extended labour force) is larger than that of women (11.4% of the extended labour force). Hungary, Malta, Poland and Czechia showed the lowest labour market slack in the EU with less than 8 % of the extended labour force facing an unmet demand for employment.

Figure 2: Labour market slack by sex and country, Q4 2020
(people aged 15-74, in % of the extended labour force)
Source: Eurostat (lfsi_sla_q)

Figure 3: Change in the labour market slack as % of the extended labour force by sex and country
(people aged 15-74, Q4 2020 compared with Q4 2019, in percentage points)
Source: Eurostat (lfsi_sla_q)

Changes with respect to the pre-COVID-19 situation

Higher demand for employment in all EU Member States, except in France, Poland and Greece

The unmet demand for employment in the European Union went up from 12.9 % in the fourth quarter of 2019 which is the reference quarter of the pre-COVID-19 situation, to 14.2 % in the fourth quarter of 2020, indicating a deterioration in the labour market as a result of the COVID-19 crisis. This decline was also reflected in 24 out of 27 EU Member States.

Referring to Figure 3, the labour market slack also became more substantial between the fourth quarter of 2019 and the fourth quarter of 2020 in all EU countries, apart from France and Poland where it remained stable and Greece where it fell by 0.4 p.p. It also decreased by 0.2 p.p. if only France Metropolitan is considered. In Estonia, Ireland, Austria and Lithuania, the level of unmet demand for employment reached in the fourth quarter of 2020 is still 3 p.p. or more above the level recorded in Q4 2019 respectively, +4.1 p.p. in Estonia, +3.2 p.p. in Ireland and +3.0 p.p. in Austria and Lithuania. By contrast, over the same period, the share of people addressing a potential demand of employment increased but by less than 1 p.p. in Denmark, Italy, Belgium, Luxembourg and Malta.

Men and women reported more disparate developments in Estonia, Poland, Romania, Slovakia, Luxembourg and Sweden

Figure 3 shows that, in some countries, the slack in the labour market for men and women did not change to the same extent from Q4 2019 to Q4 2020. In Estonia, women facing an unmet demand for employment increased by 2.7 p.p. from Q4 2019 to Q4 2020 against +5.5 p.p for men. In Poland, during the same period, the slack among women decreased by 0.5 p.p. but increased by 0.5 p.p. for men. Women in Romania, Slovakia, Luxembourg, and Sweden, on the other hand, reported higher increases than men: a difference of 2.0 p.p. in Romania, 1.2 p.p. in Slovakia, 1.1 p.p. in Luxembourg, and 1.0 p.p. in Sweden between the fourth quarter of 2019 and the fourth quarter of 2020.

Slack breakdowns by country

In the fourth quarter of 2020, unemployment accounted for 75.8% of the unmet demand for employment in Lithuania but for less than one third in the Netherlands

Figure 4: Components of the labour market slack by country, Q4 2020
(people aged 15-74, in % of the labour market slack)
Source: Eurostat (lfsi_sla_q)

In the fourth quarter of 2020, the structure of the labour market slack was considerably different across EU countries (see Figure 4). In Italy, Ireland and the Netherlands, unemployment stood at less than 40 % of the total national slack, while the underemployed part-time workers and people in the additional labour force accounted together for more than 60 % of the slack. This means that in those countries, when the total unmet demand for employment is considered, these two categories supplement unemployment significantly. In contrast, unemployment accounted for more than 70 % of the total labour market slack in Lithuania and Czechia while the other categories are less prominent than in the other countries.

Focus on unemployment

Unemployment (ILO) is one component of the labour market slack. In the EU, it stood at 6.9 % of the extended labour force in the fourth quarter of 2020, specifically reaching 7.1 % for women and 6.7 % for men (see Figure 5).

In Greece and Spain, more than one in seven persons in the extended labour force was unemployed in the fourth quarter of 2020 (15.4 % in both countries). Moreover, Greece and Spain are among the countries for which the widest gap between men and women was found in the unemployment rate as it was also observed for the whole slack. In Greece, female unemployment accounted for 18.4 % and male unemployment for 12.9 % (difference of 5.5 p.p.). In Spain, unemployment stood at 17.2 % for women against 13.8 % for men (difference of 3.4 p.p.). Moreover, in the fourth quarter of 2020, the share of unemployed women in the extended labour force exceeded by 1.0 p.p. or more the share of unemployed men in Luxembourg and Czechia and reciprocally, the male unemployment rate exceeded the female unemployment rate by 1.0 p.p. or more in Lithuania, Germany and Latvia. In contrast, four EU Member States registered an unemployment rate of less than 4.0 % of the extended labour force: Czechia (2.9 %), Poland (3.1 %), Germany and the Netherlands (3.8 % each).

Figure 5: Unemployment (ILO) by sex and country, Q4 2020
(people aged 15-74, in % of the extended labour force)
Source: Eurostat (lfsi_sla_q)

Figure 6: Change in the unemployment (ILO) as % of the extended labour force by sex and country
(people aged 15-74, Q4 2020 compared with Q4 2019, in percentage points)
Source: Eurostat (lfsi_sla_q)

In the fourth quarter of 2020, the unemployment rate was higher than in Q4 2019 in the whole EU and in the vast majority of EU Member States (24 out 27 exactly). At EU level, it increased by 0.6 p.p. (6.9 % in Q4 2020 against 6.3 % in Q4 2019), see Figure 6 and the dynamic tool at the top of this article choosing "unemployment (ILO)". In 14 EU countries, however, the unemployment rate was 1.0 p.p. or higher in Q4 2020 when comparing the two quarters. Estonia, Lithuania and Spain recorded the most substantial increases compared to the last quarter of 2019 (+3.1 p.p., +2.5 p.p. and +2.0 p.p.). In contrast, the share of unemployed people in the extended labour force decreased in France (-0.1 p.p. in France metropolitan and -0.2 p.p.in France), in Italy (-0.5 p.p.) and in Greece (-0.8 p.p.). In this section on unemployment, it is important to remember that in order to be considered unemployed according to the ILO's criteria, a person must be unemployed during the reference week, be available to start working within the next two weeks (or have already found a job to start within the next three months), and have actively sought employment at some point in the previous four weeks. As previously mentioned, this indicator should be carefully considered when taken to report on the COVID-19 crisis. People's job search status may be affected by health measures, such as whether they start or stop looking for work based on the level of activity in their country, or their availability to work (e.g. people might be available or not depending on the school opening).

Focus on the potential additional labour force

Potential additional labour force larger in Q4 2020 than in Q4 2019 in 23 EU Member States

As previously stated, the potential additional labour force is divided into two subgroups that are both outside the labour force (due to people's unavailability to work or lack of job search) but within the extended labour force. People who are available for work but do not seek it are one of these subgroups. In the fourth quarter of 2020, for the EU population aged 15-74, this category accounted for 3.7 % of the extended labour force (see Figure 7). The other subgroup is comprised of people who are looking for work but are not immediately available to begin working; this group accounted for 0.7 % of the extended labour force. In total, 4.4 % of the extended labour force is not employed but linked to employment by expressing a willingness or demand for work.

Except for Lithuania and Cyprus, all countries follow the same main pattern, which is clearly visible in Figure 7: people who are available to work but are not looking outnumber those who are looking but are not immediately available. Gender differences can be found at EU level. Indeed, the female potential additional labour force, as a percentage of the female extended labour force, stood at 5.1 %, and the male potential additional labour force, as a percentage of the male extended labour force, at 3.7 % in the fourth quarter of 2020. The largest share of the potential additional labour force are found in Italy with 10.8 % of the extended labour force, Ireland (6.6%), Finland (6.1%) and Croatia (6.1% but for Croatia, it only refers to people available but not looking for a job). In Czechia, the potential additional labour force amounted to 0.9% of the extended labour force, which was the lowest share recorded.

Figure 7: Potential additional labour force by sex and country, Q4 2020
(people aged 15-74, in % of the extended labour force)
Source: Eurostat (lfsi_sla_q)

Figure 8: Change in the potential additional labour force as % of the extended labour force by sex and country
(aged 15-74, Q4 2020 compared with Q4 2019, in percentage points)
Source: Eurostat (lfsi_sla_q)

Note: due to low data reliability related to the category "people who are seeking but not immediately available", only persons available to work but not seeking are included in Figure 7 and 8 for Croatia, Malta and Romania.

In three of the 24 EU Member States where data is available for both categories of potential additional labour force, the share of potential additional labour force exceeded the share of unemployed people in the extended labour force in the fourth quarter of 2020: Italy (+2.7 p.p. compared to unemployment), Ireland (+0.9 p.p.), and the Netherlands (+0.2 p.p.).

Figure 8 shows the comparison of the potential additional labour force between the fourth quarter of 2019 and the fourth quarter of 2020. The share increased in the vast majority of EU countries for which data is available. The highest growths in Ireland, Greece, Germany and Austria where it went up by more than 1 p.p. At the same time, it remained at the same level as in Q4 2019 in Finland and Poland while falling slightly in Belgium (-0.1 p.p.) and Latvia (-0.2 p.p.).

Focus on underemployed part-time workers

Almost 3% of the extended labour force consisted of part-time workers who want to work more hours in the EU, but around 5% in Spain and Cyprus.

In the fourth quarter of 2020, the highest shares of part-time workers wanting to work more were found in Spain (5.0 %), Cyprus (4.9 %), France (both France and France Metropolitan (4.1 %)), Ireland, Greece, the Netherlands, and Sweden (all four with 4.0 %) (see Figure 9). In contrast, less than 0.5 % of the extended labour force in Czechia and Bulgaria were underemployed part-time workers (0.3 % and 0.4 % respectively) making them a relatively small group within the extended labour force (see Figure 9).

At EU level, 2.9 % of the extended labour force were underemployed part-time workers. This share reached 4.1 % for women, which is more than double the share of men (1.9 %).

Figure 9: Underemployed part-time workers by sex and country, Q4 2020
(people aged 15-74, in % of the extended labour force)
Source: Eurostat (lfsi_sla_q)

Figure 10: Change in the underemployed part-time workers as % of the extended labour force by sex and country
(people aged 15-74, Q4 2020 compared with Q4 2019, in percentage points)
Source: Eurostat (lfsi_sla_q)

Comparing the fourth quarter of 2020 to the fourth quarter of 2019, the share of underemployed part-time workers, as a percentage of the extended labour force, remained relatively stable (+0.1 p.p. at EU level) (see Figure 10). However, five countries recorded an increase exceeding +0.5 p.p. between both quarters: the Netherlands and Sweden (+0.7 p.p.), Austria (+0.6 p.p.), Italy and Estonia (+0.5 p.p.). Lower shares of underemployed part-time workers in Q4 2020 compared with Q4 2019, with differences bigger than 0.3 p.p. were found in Greece and Malta (-0.8 p.p.) and Ireland (-0.4 p.p.).

Source data for tables and graphs

Q4 2020 Labour market slack: tables and figures

Data sources

All figures in this article are based on seasonally adjusted quarterly results from the European Union Labour Force Survey (EU-LFS).

Source: The European Union labour force survey (EU-LFS) is the largest European household sample survey providing quarterly and annual results on labour participation of people aged 15 and over as well as on persons outside the labour force. It covers residents in private households. Conscripts in military or community service are not included in the results. The EU-LFS is based on the same target populations and uses the same definitions in all countries, which means that the results are comparable between countries.

European aggregates: EU refers to the sum of EU-27 Member States.

Country notes: (1) In Germany, from the first quarter of 2020 onwards, the Labour Force Survey (LFS) has been integrated into the newly designed German microcensus as a subsample. Unfortunately, for the LFS, technical issues and the COVID-19 crisis have had a large impact on the data collection processes, resulting in low response rates and a biased sample. For this reason, the full sample of the whole microcensus has been used to estimate a restricted set of indicators for the four quarters of 2020 for the production of LFS Main Indicators. These estimates have been used for the publication of German results, but also for the calculation of EU and EA aggregates. By contrast, EU and EA aggregates published in the Detailed quarterly results (showing more and different breakdowns than the LFS Main Indicators) have been computed using only available data from the LFS subsample. As a consequence, small differences in the EU and EA aggregates in tables from both collections may be observed. For more information, see here. (2) Metropolitan France, also known as European France, is the area of the French Republic which is geographically in Europe. It comprises mainland France and Corsica, as well as nearby islands situated in the Atlantic Ocean, the English Channel and the Mediterranean Sea. In contrast, overseas France is the collective name for all the French-administered territories outside Europe. Metropolitan and overseas France together form the French Republic, referred to as "France" in the EU-LFS database.

Definitions: The concepts and definitions used in the Labour Force Survey follow the guidelines of the International Labour Organisation.

Five different articles on detailed technical and methodological information are linked from the overview page of the online publication EU Labour Force Survey.

Seasonally adjustment models: Some of the EU-LFS based seasonally adjusted data published this quarter has been revised substantially. Indeed, the outbreak of the COVID-19 crisis actually lead to a major shock into the series. The impact of COVID-19 on a number of indicators have been explicitly modelled as outliers, and the combined effect of this shock and the new identification of the models explains the observed revisions. The methodological choices of Eurostat in terms of seasonal adjustment in the COVID period are summarised in the methodological paper: "Guidance on time series treatment in the context of the COVID-19 crisis". These choices assure the quality of the results and the optimal equilibrium between the risk of high revisions and the need for meaningful figures, as less as possible affected by random variability due to the COVID shock.

Context

The COVID-19 pandemic hit Europe in January and February 2020, with the first cases confirmed in Spain, France and Italy. COVID-19 infections have since been diagnosed in all European Union (EU) Member States. To fight the pandemic, EU Member States have taken a wide variety of measures. From the second week of March, most countries closed retail shops, with the exception of supermarkets, pharmacies and banks. Bars, restaurants and hotels were also closed. In Italy and Spain, non-essential production was stopped and several countries imposed regional or even national lock-down measures which further stifled economic activities in many areas. In addition, schools were closed, public events were cancelled and private gatherings (with numbers of persons varying from 2 to over 50) banned in most EU Member States.

The majority of the preventative measures were taken during mid-March 2020, and most of the measures and restrictions were in place for the whole of April and May 2020. The first quarter of 2020 was consequently the first quarter in which the labour market across the EU was affected by COVID-19 measures taken by Member States.

Employment and unemployment as defined by the ILO concept are, in this particular situation, not sufficient to describe the developments taking place in the labour market. In the first phase of the crisis, active measures to contain employment losses led to absences from work rather than dismissals, and individuals could not look for work or were not available due to the containment measures, thus not counting as unemployed.

The three indicators supplementing the unemployment rate presented in this article provide an enhanced and richer picture than the traditional labour status framework, which classifies people as employed, unemployed or outside the labour force, i.e. in only three categories. The indicators create ‘halos’ around unemployment. This concept is further analysed in a Statistics in Focus publication titled "New measures of labour market attachment", which also explains the rationale of the indicators and provides additional insight as to how they should be interpreted. The supplementary indicators neither alter nor put in question the unemployment statistics standards used by Eurostat. Eurostat publishes unemployment statistics according to the ILO definition, the same definition as used by statistical offices all around the world. Eurostat continues publishing unemployment statistics using the ILO definition and they remain the benchmark and headline indicators.