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Archive:Key figures on the changes in the labour market

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Highlights


In the last quarter of 2020, the employment rate of people aged 20-64 stood for 72.6%, still 0.6p.p. below its level of Q4 2019, for young people aged 15-24, the difference is more substantial as they recorded a drop of 2.4p.p. between the two quarters
At the height of the crisis, in the second quarter of 2020, employment dropped in Ireland and Spain by 3.2p.p., highest drop recorded from a quarter to another between Q4 2019 and Q4 2020.
The unmet demand for employment fluctuated the most (+1p.p.) between Q1 2020 and Q2 2020 when the unemployment rose by 0.1p.p. and the people available to work but not seeking by 1p.p.

The winding down due to the COVID-19 pandemic has hit the economic activity and therefore the labour market. It visibly prejudiced employment but also moved out people from unemployment by affecting their availability or the job search. This article aims at providing an overview of the last changes in the labour market, looking simultaneously at the development with respect to employment, the entire unmet demand for employment i.e. the Labour Market Slack and people who are neither employed, available to work nor seeking. All three categories together refer to the entire population. More precisely, the groups constituting the labour market slack are the unemployed people, those fulfilling the three requirements expressed by the International Labour Office (ILO), namely being available to work, searching for work and not being employed; the underemployed part-time workers, those part-time workers who wish to work more; and, the so-called additional potential labour force. The additional potential labour force refer to people who are not unemployed but either they are available to work and want to but do not search or they search without being immediately available.

This article used quarterly and seasonally adjusted Labour Force Survey (LFS) data. It investigates the impact of the COVID-19 crisis on the overall population aged 15-74 and aims at showing the effects at the EU level and in the respective Member States as well as in the EFTA countries and candidate countries. The following article is part of the online publication Labour market in the light of the COVID 19 pandemic - quarterly statistics alongside the articles Employment, Absences from work and Hours of work.


Full article


Why is looking at unemployment not enough?

The Labour Market Slack, including unemployment but also supplementary categories, together with employment better reflect the consequences of the economic crisis

Over the last quarters, the economic downturn affected employment. At European level, the employment rate, corresponding to the share of employed people in the total population aged 20-64, stood for 73.2% in Q4 2019, consecutively accounted for 73.1% in Q1 2020, 71.7% in Q2 2020, 72.3% in Q3 2020 and 72.6% in Q4 2020. Similarly to what happened at European level, the share of employed people also decreased in all EU Member States over the last quarters, although to different extent as further explained. Usually, in case of economic crisis, unemployment including people without work, available and looking for a job is the main indicator to report on the deterioration of the Labour market. Nevertheless, the nature of the COVID-19 crisis, being first a health crisis before becoming an economic crisis, changed the reference frame. The measures taken by European governments to contain the spread of the virus, disturbed business and public entities like schools. Therefore, jobless people who would have been available to work and would have sought a job, might have given up their search because of modest return expectations or might have been no longer immediately available because of taking care of children. These people still attached to the Labour market but facing exceptional circumstances cannot be considered “unemployed” according to the ILO criteria but are included in the labour market slack, revealing therefore better the unmet demand for employment. More specifically, in addition to unemployed people and underemployed part-time workers, the labour market slack includes also the potential additional labour force i.e. those people still being available to work but not searching or searching but not immediately available. Like for unemployment, the population aged 15-74 is the reference population to report on the labour market slack. While the labour force only includes employed and unemployed people, the extended labour force includes also the aforementioned potential additional labour force.

At European level, 57.5% of the total population aged 15-74 was employed in Q4 2020 while 9.5% faced an unmet demand for employment. This share is broken down as followed: 1.9% were underemployed part-time workers, 4.6% were unemployed according to ILO criteria, 0.5% were seeking work but not immediately available and 2.5% were available to work and want to but not seeking. The remaining population which accounts for 33.0% of the total population is considered outside the extended labour force which means that they are jobless persons neither available to work nor seeking. All these shares are displayed in Figure 1 for a better understanding.

Figure 1: Employment and unmet demand for employment (labour market slack) in the EU
(in % total population aged 15-74, Q4 2020)
Source: Eurostat (lfsi_sup_q) and (une_rt_q)

Specific developments quarter by quarter in the EU

Over the last quarters, visible changes occurred on the labour market as shown in Figure 2. From Q4 2019 to Q1 2020, at the very beginning of the health crisis, the slight decrease in employment (-0.4p.p.) at EU level was mainly offset by an increase in the share of people available to work but not seeking (+0.3p.p.). In the following quarter, Q2 2020, characterised by the first lockdowns, the share of employed people dropped by 1.4p.p.. Even if in most countries, measures have been taken to minimise the employment losses, it is widely assumed that enterprises froze or reduced the hiring or did not renew part of temporary contracts as showed in this article on employment. This fall in employment produced an increase in the labour market slack (+1p.p.) and in the share of people outside the extended labour force, those neither seeking nor available (+0.4p.p.). The rise in the labour market slack was mainly due to an increase in the share of people available but not seeking (+1p.p.) while the share of unemployed people remained almost stable (+0.1p.p.). From Q2 2020 to Q3 2020, corresponding to the summer times and the restart to a certain degree of many businesses, the employment rate of people aged 15-74 went up by 0.5p.p. to reach 57.1%. This upturn was accompanied with a slight decline in the slack, the unmet demand for employment (-0.2p.p.). About this period, it seems that people started again looking for a job as the near stability of the slack hides a noticeable increase in the share of unemployed people fulfilling the ILO criteria (+0.5%) offset by a decrease of people available to work but not seeking (-0.8%). In addition, the share of people outside the extended labour force neither available nor seeking also recorded a drop of 0.3p.p. Compared to the previous quarter, the share of employed people kept on increasing in Q4 2020 (+0.4p.p.), accounting for 57.5% of the total population. In parallel, the slack turned back and decreased by 0.3p.p.. This decrease is due a decrease in unemployment (-0.2p.p.) and in the share of underemployed part-time workers (-0.1p.p.).

Figure 2: Quarterly development of the employment rate, the labour market slack and its components, EU, Q4 2019 - Q4 2020
(in percentage points, population aged 15-74)
Source: Eurostat (lfsi_sup_q) and (une_rt_q)

Sharpest declines in employment in Estonia and Spain

Looking at the quarterly developments among EU Member States, not all countries underwent in the same way in terms of employment. The vast majority was impacted the most in Q2 2020 when the employment rate of people aged 15-74 declined in 16 out of 27 EU countries by 1p.p. or more. Ireland and Spain reported the most substantial decreases quarter-on-quarter among Member States over the past year. The share of employed people dropped by 3.2p.p. both in Ireland and in Spain in the second quarter 2020. Estonia and Italy reported the third and the fourth biggest fall in the employment rate, as it went down by 2.7p.p. in Estonia and by 2.3p.p. in Italy in the second quarter. However, Luxembourg reported its biggest decrease in the first quarter 2020 (-0.4p.p.) while the drop was more substantial in all other EU Member States in the second quarter 2020. The slack rose the most in Ireland, Spain and Austria in the second quarter 2020, all three recording an increase exceeding 2p.p. It also turned back more than in other countries in Q3 2020 in Italy (-1.4p.p.) and in Q4 2020 in Croatia (-1.5p.p.). The share of people outside the extended labour force went up sizably in Q2 2020 in Estonia (+1.7p.p.) and went down the most also in Estonia in Q3 2020 (-1.3p.p). Between Q3 2020 and Q4 2020, the employment rate kept on increasing at the European level (+0.4p.p.) but to a lesser extent than the growth reported between the two previous quarters i.e. Q2 and Q3 2020 (+0.5p.p.). Nevertheless, this development at the EU level is not reverberated in the same way across the EU Member States. Between Q2 and Q3 2020, the share of employed people increased in 16 countries, decreased in six and was stable in five. In Italy, Spain, Bulgaria, Ireland and Austria, the employment rate increased even by more than 1p.p. For comparison purpose, between Q3 and Q4 2020, the employment rate increased in more countries, 20 exactly but with only two countries Luxembourg and Portugal with a growth of more than 1p.p.. It also decreased in seven countries. So, between Q2 and Q3 2020, less countries recorded rises in employment but those increases were sharper than in between Q3 and Q4 2020, when more countries reported growths in employment but weaker than those observed between Q2 and Q3 2020.

Figure 3: Quarterly development by labour category and EU Member States, Q4 2019 - Q4 2020
(Compared with the previous quarter, in percentage points)
Source: Eurostat (lfsi_sup_q) and (une_rt_q)

Where we were before 2020 and at the end of 2020?

Comparing Q4 2020 with Q4 2019, the quarter just before the start of the health crisis with the last quarter somehow provides an indication of the potential recovery of the labour market as shown in Figure 4. In Q4 2020, only very few countries retrieved the level of employed people before the crisis. The four exceptions are Luxembourg, Greece, Malta where the employment rate in Q4 2020 exceeds the employment rate in Q4 2019 (respectively by +0.6p.p., 0.5p.p. and +0.3p.p.) and Poland where it is stable. The most affected countries in which the employment rate dropped by 2p.p or more between both quarters are Estonia (going down from 68.7% to 66.0%, corresponding to a drop of 2.7p.p.), Spain (from 52.6% in Q4 2019 to 50.5% in Q4 2020, -2.5p.p.) and Ireland (from 61.2% to 59.2%, -2p.p.). Comparing the last quarter of 2020 with the last quarter of 2019, the cut in the employment rate was between -1.9 p.p. and 1.0 p.p. in Austria, Latvia, Sweden, Lithuania, Finland, Bulgaria, Italy, Germany, Slovakia, Cyprus, Croatia, Portugal and the Netherlands and between -0.9 and -0.1p.p. in Belgium, Czechia, Slovenia, Romania, Hungary, France and Denmark. With respect to the unmet demand of employment, the labour market slack in Q4 2020 exceeded by more than 2p.p. its level in Q4 2019 in Estonia (+3.3p.p.), Austria (+2.3p.p.), Lithuania and Ireland (+2.2p.p.) and Cyprus (+2.0p.p.). Only in Greece and France, the unmet demand for employment in Q4 2020 is less substantial than before the COVID-19 crisis in Q4 2019 (differences of respectively 0.3p.p. and 0.1p.p.).

Figure 4: Employment and unmet demand for employment (labour market slack) in Q4 2019 and in Q4 2020 by EU Member States
(in % of total population aged 15-74)
Source: Eurostat (lfsi_sup_q) and (une_rt_q)

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Who were the most affected by the crisis?

COVID-19 crisis hit young people, more than people aged more than 25 years

Based on the evolution of the Labour market slack by age group, the increase of the unmet demand for employment expressed as percentage of the extended labour force was much sharper among young people aged 15-24 between Q4 2019 and Q3 2020 (+6.2p.p. between both quarters). This is much more than for those observed for people aged 25-54 (+2.0p.p.) and for people aged 55-74 (+1.2p.p.). Nonetheless, the decrease of the slack in Q3 2020 compared with Q2 2020 among young people was also more substantial (-1.9p.p.) than for the other age groups: -0.9p.p. for people aged 25-54 and -0.3p.p. for people aged 55-74 but these decreases did not balance at this stage the growths recorded in the first quarters of 2020 as it can be easily seen on the Figure 5.

More employed people aged 55-64 in Q4 2020 than in Q4 2019

The employment rate of young people fell in the EU by 3.0p.p., from 33.5% to 30.1% from Q4 2019 to Q2 2020, increased by 0.6p.p. between Q2 and Q3 2020 reaching 31.1% and remained stable between Q3 2020 and Q4 2020. The recovery seems to be far from being completed as the difference between Q4 2019 and Q4 2020 is still 2.4p.p., 33.5% in Q4 2019 against 31.1% in Q4 2020. At the opposite, the employment rate of people aged 55-64 recorded at the European level in Q4 2020 exceeded by more than 0.5p.p. the employment rate recorded in Q4 2019.

Figure 5: Evolution of the labour market slack in the EU by age group
(% of the extended labour force)
Source: Eurostat (lfsi_sla_q)
Figure 6: Evolution of employment in the EU by age group, Q1 2010 - Q4 2020
(in % of the total population)
Source: Eurostat (lfsi_emp_q)

Looking at the Figure XX that reports on the quarterly development of the population aged 15-24 by country, it is clearly visible that a country showing a low share of the unmet demand for employment does not automatically show a high share of employed people in the total population. This finding seems to be structural as it was observed before the start of the COVID-19 crisis. Young people standing outside the extended labour force, so those who are not employed, neither available to work and nor seeking vary significantly among countries. This might be due to being fully dedicated to their studies or by standing outside the labour market (further details on the concepts cf. article on NEET + Youth https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Participation_of_young_people_in_education_and_the_labour_marke). For example, the employment rate of young people exceeds 40% in all quarters from Q4 2019 to Q4 2020 in Malta, Germany, Austria, the Netherlands and Denmark but Malta recorded in Q4 2020 a relatively low slack of XX% of the population while Denmark recorded a slack of almost 20%. On the other hand, lower employment rates can be associated to lower slacks, as it is the case in Bulgaria or Slovakia. Nevertheless, an increase in the unmet demand for employment nevertheless often accompanies a decrease in the employment rate. This means that the development of the categories seems a bit more connected that the level itself of the slack or employment. The evolution in the slack appears like the mirror evolution of the employment in some countries like Lithuania or France XXXX. However, this was not always the case as it occurred in Bulgaria or Slovenia where the Labour market slack did not offset a decrease in the employment share. XXX, XXX and XXX highlight visible differences among age groups. Young people were more affected in than the two other With respect to the population aged 25-54, the employment rate that was higher than 75% in all countries in Q4 2020 except in XX, in XX and XX fluctuated much less over the last quarters than for young people and even older people (55-74). However, drops equal or exceeding 2p.p. have been reported in Lithuania (-2.2p.p. and 2.0p.p), Portugal (-2.1p.p.), Bulgaria (-2.3p.p.) and Spain (-3.4p.p.) in Q2 2020. Among people aged 55-74, a relevant finding is that before 2020, the employment rate grew on a continuous way (cf artice on employment) due to policies over the EU aiming at maintaining older people in employment (EU object). Since the beginning of the COVID Crisis the rate is quite stable for the first time since XXX, that is already a “””””first sign of weakening””””. At national level, XXXXXX

Figure 7: Quarterly development of the Labour Market Slack and employment by EU Member States, people aged 15-24, Q4 2019-Q4 2020
(in % of the total population)
Source: Eurostat (lfsi_sup_q) and (une_rt_q)
Figure 8: Quarterly development of the Labour Market Slack and employment by EU Member States, people aged 25-54, Q4 2019-Q4 2020
(in % of the total population)
Source: Eurostat (lfsi_sup_q) and (une_rt_q)
Figure 9: Quarterly development of the Labour Market Slack and employment by EU Member States, people aged 55-74, Q4 2019-Q4 2020
(in % of the total population)
Source: Eurostat (lfsi_sup_q) and (une_rt_q)

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