Archive:Key figures on the changes in the labour market

Data extracted in April 2021

Highlights

The employment rate for people aged 20 to 64 was 72.6 % in the fourth quarter of 2020, 0.6 p. p. lower than a year earlier, but young people (aged 15 to 24) experienced a more significant 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 in Ireland and Spain fell by 3.2 percentage points, the largest drop from one quarter to the next in 2020.

Unmet demand for employment fluctuated the most (+1.0 p.p.) between the first and second quarters of 2020, when unemployment increased by +0.1 p.p. and the share of people available to work but not looking increased by +1.0 p.p.

The COVID-19 pandemic has slowed economic activity and, as a result, the labor market. It clearly prejudiced employment but also pushed out people of unemployment by affecting their availability or the job search.

This article aims to provide an overview of the quarterly changes in the labour market in 2020, focusing on employment, the total unmet demand for employment (also known as the labour market slack) and the share of people who are neither employed, available to work, nor looking. All three categories together refer to the entire population as a whole. This article investigates the impact of the COVID-19 crisis on the overall population, with the aim of demonstrating the effects at the EU level and in the respective Member States as well as in the EFTA countries and candidate countries. It makes use of quarterly and seasonally adjusted data from the European Union Labour Force Survey (EU-LFS).

This article, along with the articles Labour market slack - the unmet need for employment and Employment, is part of the online publication Labour market in the light of the COVID 19 pandemic - quarterly statistics.

Full article

Main facts

The most recent European Union Labour Force Survey (EU-LFS) data provides a quarterly overview on 2020. As shown 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 (which includes the employment and labour market slack) in the fourth quarter of 2020 (29,1 million people). One year ago, in the fourth quarter of 2019, labour market slack accounted for 12.5 % of the total extended labour force. It reached at 14.3 % over the course of a year, in the second quarter of 2020, when overall economic activity slowed dramatically.

It is worth noting that, in addition to unemployed people the labour market slack includes the underemployed part-time workers and the potential additional labour force, which includes people who are available to work but are not looking for work and people who are looking but are not immediately available. While the labour force only includes employed and unemployed individuals, the extended labour force includes the previously mentioned 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. In the fourth quarter of 2020, the share of people aged 20 to 64 was 72.6 % (188,7 million people). It is 0.6 percentage point (p.p.) lower than the 73.2 % recorded in the fourth quarter of 2019. However, compared to Q2 2020, when it fell to 71.7 %, employment increased by 0.9 p.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 2, it is clear that not all age groups were affected equally. Young people aged 15-24 experienced the greatest drop in employment and the greatest increase in labour market slack during the health crisis when compared to other age groups. Please refer to the map. Figure 3 depicts changes in the employment rate of young people (aged 15 to 24) in EU Member States from Q4 2019 to Q4 2020, with additional analysis provided under the last section.. Furthermore, as previously stated, the labour market slack includes the unemployment rate and its supplementary indicators, including those constituting the potential additional labour force, with people aged 15 to 74 serving as the reference population. For these two reasons, the following sections will focus on people aged 15-74.

Figure 3: Differences in the employment rate of young people (aged 15 to 24)
(in percentage points (p.p.), Q4 2020 compared to Q4 2019)
Source: Eurostat (lfsi_emp_q)

Why is focusing solely on unemployment insufficient?

Together with employment, labour market slack better reflects the effects of the economic crisis than unemployment.

The economic downturn has had an impact on employment in recent quarters. At the EU level, the employment rate or the share of employed people in the total population aged 15-74 fell by 1.5 p.p. in just six 6 months, from Q4 2019 to Q2 2020. Similarly to what happened at the EU level, the proportion of employed people decreased in all EU Member States, albeit to varying degrees, as further explained.

Typically, in times of economic crisis, unemployment (which includes people who are not employed, available and looking for a job) is the primary indicator to report on the deterioration on the labour market. Nonetheless, the nature of the COVID-19 crisis, which began as a health crisis before progressing to an economic crisis, altered the reference frame. Measures taken by European governments to contain the spread of the virus, disrupted business and public entities such as schools. As a result, jobless people who would have been available to work and would have sought employment, may have given up their search due to low return expectations, or may no longer be available due to child care. These people, who are still connected to the labour market but are experiencing exceptional circumstances, are not considered "unemployed" under ILO criteria, but are included in labour market slack, revealing the unmet demand for employment more clearly. For further explanations on the concept of the labour market slack and a detailed analysis by gender, see the Labour market slack in detail article.

In Q4 2020, 57.5 % of the total population aged 15 to 74 in the EU was employed, while 9.5 % faced an unmet demand for employment. This portion is divided as follows: 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 but did not seek. 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 in 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 (-0.4 p.p.) at EU level was mainly offset by an increase in the share of people available to work but not seeking (+0.3 p.p.). It is worth reminding that employment does exclude the underemployed part-time workers for this analysis. In the following quarter, Q2 2020, characterised by the first lockdowns, the share of employed people dropped by 1.4 p.p. Even though most countries have taken measures to reduce job losses, it is widely assumed that businesses froze or reduced hiring or did not renew a portion of temporary contracts, as shown in this employment article. This fall in employment produced an increase in the labour market slack (+1.0 p.p.) and in the share of people outside the extended labour force, those neither seeking nor available (+0.4 p.p.). The rise in the labour market slack was mainly due to an increase in the share of people available but not seeking (+1.0 p.p.) while the share of unemployed people remained almost stable (+0.1 p.p.).

From Q2 2020 to Q3 2020, corresponding to the summer season and the partial restart of many businesses, the share of employed people aged 15-74 increased by 0.5 p.p. to 57.1 %. This upturn was accompanied by a slight decline in the slack, the unmet demand for employment (-0.2 p.p.). Speaking of this period, it appears that people began looking for work again, as the near-stable slack conceals a noticeable increase in the share of unemployed people meeting the ILO criteria (+0.5 %), offset by a decrease in people available to work but not seeking work (-0.8 %). In addition, the share of people outside the extended labour force neither available nor seeking also recorded a drop of 0.3 p.p.

Compared to Q3 2020, the share of employed people kept on increasing in Q4 2020 (+0.4 p.p.), accounting for 57.5 % of the total population. In parallel, the labour market slack turned back for the second consecutive quarter, decreasing by 0.3 p.p. This decrease is due to two factors: a decrease in unemployment (-0.2 p.p.) and in the share of underemployed part-time workers (-0.1 p.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 the 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 1 p.p. or more. All changes are reported by category and by country in Figure 5. Ireland and Spain reported the most substantial decreases from quarter to quarter among the Member States over the past year. The share of employed people dropped by 3.2 p.p. both in Ireland and in Spain in the second quarter of 2020. Estonia and Italy reported the third and the fourth biggest fall in the employment rate, as it went down by 2.7 p.p. in Estonia and by 2.3 p.p. in Italy in the second quarter.

By contrast, the labour market slack rose the most in Ireland, Spain and Austria in the second quarter of 2020, all three recording an increase exceeding 2 p.p. in the unmet demand for employment. In Q3 2020, the slack recorded a higher decline than in other countries in Italy (-1.4 p.p.) and in Q4 2020 in Luxembourg (-1.5 p.p.). The share of people outside the extended labour force went up sizably in Q2 2020 in Estonia (+1.7 p.p.) where it went down also the most in Q3 2020 (-1.3 p.p).

Between Q3 2020 and Q4 2020, the employment rate of people aged 15-74, excluding part-time workers, increased at EU level (+0.4 p.p.) but to a lesser extent than the growth reported between the two previous quarters, namely Q2 and Q3 2020 (+0.5 p.p.). Nonetheless, this development at EU level has not had the same impact across all EU Member States. Between the second and third quarters of 2020, the share of employed people increased in 16 countries, decreased in 6, and remained stable in 5. In Italy, Spain, Bulgaria, Ireland and Austria, the employment rate increased by even more than 1 p.p. For comparison, the employment rate increased in 20 countries between Q3 and Q4 2020, with only two countries, namely Luxembourg and Portugal, experiencing growth rates greater than 1 p.p.. It also decreased in seven countries. So, fewer countries reported increases in employment between Q2 and Q3 2020, but those increases were sharper than those reported between Q3 and Q4 2020, when more countries reported increases in employment but they were weaker than those observed between Q2 and Q3 2020.

Figure 5a: Quarterly development by labour category and EU Member States, Q4 2019 - Q4 2020
(People aged 15-74,quarter-on-quarter comparison, in p.p., protocol order 1st set)
Source: Eurostat (lfsi_sup_q) and (une_rt_q)

Figure 5b: Quarterly development by labour category and EU Member States, Q4 2019 - Q4 2020
(People aged 15-74,quarter-on-quarter comparison, in p.p., protocol order 2d set)
Source: Eurostat (lfsi_sup_q) and (une_rt_q)

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

The comparison of Q4 2020 to Q4 2019 (the quarter just before the start of the health crisis) provides some indication of the potential labour market recovery, as shown in Figure 6. Only a few countries returned to pre-crisis employment levels in Q4 2020 (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 and Malta, where the employment rate in Q4 2020 exceeded the employment rate recorded in Q4 2019 (respectively by +0.6 p.p., +0.5 p.p. and +0.3 p.p.) and Poland where it remained stable. In contrast, the most affected countries, where the employment rate fell by 2 p.p. or more between Q4 2019 and Q4 2020, are Estonia (which fell from 68.7 % to 66.0 %, a 2.7 p.p. drop), Spain (which fell from 52.6 % in Q4 2019 to 50.5 % in Q4 2020, a 2.1 p.p. drop), and Ireland (from 61.2 % to 59.2 %, -2.0 p.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 -0.9 p.p. and -0.1 p.p. in Belgium, Czechia, Slovenia, Romania, Hungary, France and Denmark.

In Q4 2020, the unmet demand for employment (i.e. the labour market slack) exceeded by 2 p.p. or more the level of Q4 2019 in Estonia (+3.3 p.p.), Austria (+2.3 p.p.), Lithuania and Ireland (+2.2 p.p.) and Cyprus (+2.0 p.p.). Only in Greece and France, the unmet demand for employment in Q4 2020 was less substantial than in Q4 2019 before the COVID-19 crisis (differences of respectively 0.3 p.p. and 0.1 p.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

Between Q4 2019 and Q2 2020, the increase of the unmet demand for employment expressed as a percentage of the extended labour force was much sharper among young people aged 15-24 (+6.2 p.p. between both quarters), far from the increases observed for people aged 25-54 (+2.0 p.p.) and for people aged 55-74 (+1.2 p.p.) as shown in Figure 1. Nonetheless, between Q2 2020 and Q4 2020, the unmet demand for employment among young people decreased more (-1.9 p.p.) than for the other age groups, namely people aged 25-54 (-0.9 p.p.) and people aged 55-74 (-0.3 p.p.). However, the decrease in the labour market slack of young people in the third and the fourth quarter was far from balancing out the sharp rise recorded at the beginning of the health crisis as also shown in Figure 1.

Looking at Figure 7 that reports on the quarterly development of the population aged 15-24 by country, it is clear that a country showing a low share of the unmet demand for employment does not automatically show a high share of employed people (excluding underemployed people who are including in the slack). Nevertheless, beyond the picture reflecting more structural features of the labour market, fluctuations often respond to the following pattern: a decrease in the unmet demand for employment accompanies an increase in the employment rate and reciprocally like in the Netherlands or Hungary in Q3 2020. Nevertheless, in some cases, the labour market slack did not offset at all a decrease in the share of employment, making the category outside the extended labour force bigger as it occurred in Malta and Bulgaria in Q1 2020 or Portugal in Q2 2020.

Between the first and the second quarter of 2020, young people were the most affected in Ireland, the Netherlands, Estonia, Slovenia and Spain where the share of employed young people excluding underemployed part-time workers fell by more than 4p.p. . From the second to the third quarter of 2020, a rebound higher than 2.0p.p. were recorded in the Netherlands, Ireland and France (metropolitan). As regards the latest development, from Q3 2020 to Q4 2020, the share of employed young people (excl.underemployed part-time workers) decreased by 1p.p. or more in Malta, Ireland (both -1.7p.p.), Hungary and Belgium (both -1.1p.p.) and increased by more than 2p.p. in Cyprus, Lithuania and Romania. As regards the slack from the first to the second quarter of 2020, the highest increases in the share of people facing an unmet demand for employment aged 15-24 were found in the Netherlands (+5.7p.p.), Ireland (5.3p.p.) and Croatia (+4p.p.). From the second to the third quarter of 2020, the slack of young people decreased the most in Latvia (-4.7p.p.), Croatia (-3.5p.p.), the Netherlands (-2.6p.p.) and Austria (-2.2p.p.) but still increased by more than 2p.p. in Estonia (+2.8p.p.) and Cyprus (+2.7p.p.). The fourth quarter of 2020 compared to the third quarter of 2020 showed lower variations: largest increases in Croatia (+1.6p.p.) and Latvia (+1.4p.p.) and largest decreases in Spain (-1.3p.p.), in Lithuania (-1.2p.p.) and in Ireland (-1.1p.p.).

People aged 55 to 64 were maintained in employment

With respect to the population aged 25-54 (see Figure 8), the share of employed people was higher than 75% in all countries in Q4 2020 except in Spain, Italy and Greece with respectively 69.2 %, 67.6 % and 67.5 % of the population being employed. This share still excludes the underemployed part-time workers who are encompassed in the labour market slack. The employment of people aged 25-54 fluctuated much less over the quarters of 2020 than for young people. However, drops equal to or exceeding 2 p.p. have been reported in Spain (-4.0 p.p.), Bulgaria (-3.5 p.p.), Italy (-3.1 p.p.), Ireland (-3.0 p.p.) and Austria (-2.7 p.p.) in Q2 2020. Consecutively, in Q3 2020, employment sharply increased in Italy (+2.6 p.p.) and in Spain (+2.3 p.p.). At the end of 2020, from Q3 to Q4 2020, the share of employed people went up by more than 2p.p. in Luxembourg (+2.7 p.p.) and Malta (+2.3 p.p.).

In the second quarter of 2020, the share of people aged 55-74 who were employed amounted to 36.2% of the total EU population against 36.8% two quarters earlier (-0.6 p.p.) (see Figure 9). However, from the second quarter to the fourth quarter, this share increased by 0.4p.p. and was 36.6%, almost reaching its level of the fourth quarter 2019 in the EU. Focusing on national level, Lithuania, Estonia and Romania registered the biggest decreases in the share of employed people in Q2 2020 compared to Q1 2020 for this age group (between -2. p.p. and -1 p.p.) but in Slovenia, employed people aged 55-74 increased by 1.5 p.p. during the same period. In the third quarter of 2020, increases higher than 1 p.p. were recorded in Portugal (+1.3 p.p.), Lithuania (+1.2 p.p.) and Greece (+1.1 p.p.), no EU Member States registered decreases greater than 1 p.p. during this period. Finally, in the fourth quarter, Slovenia and Portugal showed the biggest variations from the third quarter, respectively +1.2 p.p. and +1.1 p.p.).

By contrast with Figure 9, Figure 2 only focuses on people aged 55 to 64 and shows the employment rate but this time also including underemployed part-time workers. Based on the data presented in this figure, approximately six out of 10 persons aged 55 to 64 at EU level were employed in Q4 2019, 59.7 % exactly. Within the two first quarters of 2020, the share slightly decreased (-0.5 p.p.) to reach 59.2 %. However, the last two quarterly variations amounted each to +0.5 p.p., and the employment rate of people aged 55-64 was consequently higher in Q4 2020 than in Q4 2019, accounting for 60.2 % of the total population. Among EU Member States, the share of employed people aged 55-74 did not increase or decrease by more than 2 p.p. over 2020. Note that the increases in employment are likely due to job retention of people aged 55 to 64 instead of recent starters.

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)

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).

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) 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.

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 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.