Labour market developments have been improving against the background of a gradual economic recovery in the EU. Unemployment in the EU has continued to fall and job finding rates have modestly improved. However, despite its recent fall, unemployment remains high.
The number of unemployed in the first quarter of 2015 was 23.6 million in the EU. The share of long-term unemployed is on the rise, standing at 4.9% in the first quarter of 2015.
According to the findings of the new 2015 Labour Market and Wage Developments in Europe report, job creation was significant in 2014 considering the weak pace of recovery. After five years of almost continuous decline, in 2014 employment expanded at an annual rate of 1%. This unusually swift response of unemployment has been supported inter alia by supportive labour cost developments.
Investment and reforms
Yet, more investment is needed to make more progress and address long-term unemployment. The swift implementation of the €315 billion Investment Plan for Europe would help to increase investment rates needed to maintain a job-rich recovery.
The analysis shows a significant acceleration of reforms in the majority of European economies since 2008.
- In the immediate aftermath of the crisis, policy action focussed on cushioning the short-term impact of the crisis on employment and incomes.
- In a second phase measures were passed to make labour markets more capable to adjust.
- A third phase emerges now, with increasing efforts to tackle the social impact of the crisis, through better targeting of Active Labour Market Policies, enhanced social safety nets and reductions in the tax wedge.
The report also focuses on the role played during the crisis by labour mobility in response to economic events affecting some but not all countries. Labour mobility, which was already on the rise well before the crisis, has helped to attenuate disparities in the levels of unemployment between countries. Mobility levels, however, remain low in Europe with less than 5% of working citizens living in a different country than the one they were born in as compared to nearly 30% in the US.
Addressing long-term unemployment is one of the key challenges of the jobs and growth agenda set out in the political priorities of the Juncker Commission. A strengthening of the economy will not be enough to get all the long-term unemployed back to work. Policies are required both on the demand side, to encourage job creation, and on the supply side, supporting especially those with long spells out of work in re-training and searching for a job.