Archive:Key figures on the changes in the labour market

Data extracted in April 2021

Highlights

In the last quarter of 2020, the employment rate of people aged 20-64 stood at 72.6%, still 0.6 p.p. below its level one year earlier, but young people (aged 15-24) recorded a more substantial drop of 2.4 p.p. in this one-year period.

At the height of the crisis, between the first and second quarter of 2020, employment dropped in Ireland and Spain by 3.2 p.p., which is the highest drop from one quarter to another in 2020.

The unmet demand for employment fluctuated the most (+1.0 p.p.) between the first and second quarter of 2020, when the unemployment rose by +0.1 p.p. and people available to work but not seeking by +1.0 p.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 quarterly changes in the labour market in 2020, looking simultaneously at the development with respect to employment, the entire unmet demand for employment (also called the labour market slack) and the share of people who are neither employed, available to work, nor seeking. All three categories together refer to the entire population.

This article uses quarterly and seasonally adjusted European Union Labour Force Survey (EU-LFS) data. It investigates the impact of the COVID-19 crisis on the overall population 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

Main facts

The last data released from the Labour Force Survey provides a quarterly overview on 2020. As shown in the European Statistical Recovery Dashboard produced by Eurostat as well as in Figure 1, the labour market slack, meaning the unmet demand for employment, of people aged 20-64 reached 13.7% of the extended labour force in the last quarter of 2020. One year before, in the last quarter of 2019, the labour market slack accounted for 12.5% (of the extended labour force). Between both quarters, it culminated at 14.3% in the second quarter of 2020 when the whole economic activity slowed drastically down. More specifically, in addition to unemployed people, the labour market slack includes underemployed part-time workers, as well as the potential additional labour force i.e. those people still being available to work but not searching or searching but not immediately available. While the labour force only includes employed and unemployed people, the extended labour force includes also the aforementioned potential additional labour force.

Figure 1: Evolution of the labour market slack in the EU by age group
(% of the extended labour force)
Source: Eurostat (lfsi_sla_q)

Figure 2 presents the evolution of the employment rate by age group. Among people aged 20-64, the share of employed people stood for 72.6% in Q4 2020. It is 0.6p.p. below its level recorded in Q4 2019 which was 73.2%. However, compared with Q2 2020 when it went down to 71.7%, the employment recorded an increase of 0.9p.p.

Figure 2: Evolution of employment in the EU by age group, Q1 2010 - Q4 2020
(in % of the total population)
Source: Eurostat (lfsi_emp_q)

Based on Figure 1 and Figure 2, it is clearly visible that all age groups were not affected in the same way. Young people aged 15-24 recorded the most substantial drop in terms of employment during the health crisis and the most substantial increase in the labour market slack compared to the other age groups. Moreover, the labour market slack, further explained in this article, includes the unemployment and indicators supplementing the unemployment rate, among them those constituting the potential additional labour force, having the population aged 15-74 as reference population. These two reasons explain that the following analysis is based on population aged 15-74.

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 EU level, the employment rate, corresponding to the share of employed people in the total population dropped by 1.5p.p. within only two quarters, namely Q4 2019 and Q2 2020. Similarly to what happened at EU 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.

At EU 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 were 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 3 for a better understanding. In order to reflect the changes in the whole population without overlapping, employed people exclude the underemployed part-time workers who are included in the labour market slack.

Figure 3: 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 4. 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 Q3 2020, 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 for the second consecutive quarter, decreasing by 0.3p.p.. This decrease is due to two factors: a decrease in unemployment (-0.2p.p.) and in the share of underemployed part-time workers (-0.1p.p.).

Figure 4: 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 Ireland 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 (excluding part-time workers) declined in 16 out of 27 EU countries by 1p.p. or more. All changes are reported by category and by country in Figure 5. 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 third quarter 2020 (-0.4p.p.) while the drop was more substantial in all other EU Member States in the second quarter 2020. The labour market slack rose the most in Ireland, Spain and Austria in the second quarter 2020, all three recording an increase exceeding 2p.p. The slack also recorded a higher decline than in other countries in Italy (-1.4p.p.) in Q3 2020 and in Luxembourg (-1.5p.p.) in Q4 2020. 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 of people aged 15-74 excluding part-time workers kept on increasing at the EU 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 by even 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, namely Luxembourg and Portugal with a growth exceeding 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 between Q3 and Q4 2020, when more countries reported growths in employment but weaker than those observed between Q2 and Q3 2020.

Figure 5: 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 were we 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 6. In Q4 2020, only very few countries retrieved the level of employment before the crisis (as a reminder, for comparison purpose, underemployed part-time workers are excluded from employment and included in the labour market slack). The four exceptions are Luxembourg, Greece, Malta, where the employment rate in Q4 2020 exceeded the employment rate recorded in Q4 2019 (respectively by +0.6p.p., +0.5p.p. and +0.3p.p.) and Poland where it was stable. In contrast, the most affected countries in which the employment rate dropped by 2p.p or more between Q4 2019 and Q4 2020 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, -2.1p.p.) and Ireland (from 61.2% to 59.2%, -2.0p.p.). Over the same period, 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 -0.9p.p. and -0.1p.p. in Belgium, Czechia, Slovenia, Romania, Hungary, France and Denmark. In Q4 2020, with respect to the unmet demand for employment, the labour market slack, 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 6: 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)

Who were the most affected by the crisis?

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

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 Q2 2020 (+6.2p.p. between both quarters). This finding can be seen in Figure 1 at the top of the article. The increase in the labour market slack of young people was much more substantial than the increases observed for people aged 25-54 (+2.0p.p.) and for people aged 55-74 (+1.2p.p.). Nonetheless, the decrease in the unmet demand for employment from Q2 2020 to Q4 2020 among young people was also more substantial (-1.9p.p.) than for the other age groups, namely -0.9p.p. for people aged 25-54 and -0.3p.p. for people aged 55-74. In any case, the decrease in the labour market slack of young people was far from balancing out the sharp rise recorded at the beginning of the health crisis as it can be easily seen on the Figure 1.

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

The employment rate of young people expressed as percentage of the total population fell in the EU by 3.0p.p., from 33.5% to 30.5% between Q4 2019 and 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 still very weak as the difference between Q4 2019 and Q4 2020 still amounted to 2.4p.p.: 33.5% in Q4 2019 against 31.1% in Q4 2020. Among people aged 25-54, the employment rate went down from 80.7% in Q4 2020 to 79.2% in Q2 2020 which was the lowest value recorded since the start of the COVID-19 crisis. It consecutively raised to reach 80.1% in Q4 2020. At the opposite, approximately six out of 10 persons aged 55-64 at the EU level were employed in Q4 2019, 59.7% exactly. Within the two first quarters of 2020, the share slightly decreased (- 0.5p.p.) to reach 59.2% however, the last two quarter-on-quarter variation equalled each to 0.5p.p. and the employment rate of people aged 55-64 is 0.5p.p. higher in Q4 2020 than the the employment rate recorded in Q4 2019, accounting for 60.2% of the total population.

Source data for tables and graphs

2020Q4_Key consequences data

Data sources

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

Main indicators

Annex table: Main indicators relating to employment, unemployment and the labour market slack by country and by quarter
(Q4 2019-Q4 2020)
Source: Eurostat (une_rt_q), (lfsi_sla_q) and (lfsi_emp_q)

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 note: In Germany, from the first quarter of 2020 onwards, the Labour Force Survey (LFS) is part of a new system of integrated household surveys. Unfortunately, technical issues and the COVID-19 crisis has had a large impact on data collection processes, resulting in low response rates and a biased sample. For this reason, additional data from other integrated household surveys has been used in addition to the LFS subsample, to estimate a restricted set of indicators for the first three quarters of 2020, for the production of LFS Main Indicators. These estimates have been used for the publication of German results, but also in 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.

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.

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 now 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 apart from supermarkets, pharmacies and banks. Bars, restaurants and hotels have also been closed. In Italy and Spain, non-essential production was stopped and several countries imposed regional or even national lock-down measures which further stifled the 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 50) were banned in most Member States.

The large majority of the prevention measures were taken during mid-March 2020 and most of the prevention measures and restrictions were kept for the whole of April and May 2020. The first quarter of 2020 is consequently the first quarter in which the labour market across the EU has been affected by COVID-19 measures taken by the 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 this first phase of the crisis, active measures to contain employment losses led to absences from work rather than dismissals, and individuals could not search 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.