Slowdown in EU labour market recovery

The labour market recovery in the EU has slowed down, according to the European Commission’s most recent Employment and Social Situation Quarterly Review. Published at the end of September 2011, it also shows that the impact of the crisis on young workers, migrants, low-skilled workers and women, remains severe. However, although the employment rate in the EU has not returned to its pre-crisis level, its year-on-year rate has improved marginally in most Member States.

Background

The Employment and Social Situation Quarterly Review (2.4Mb PDF) published on 30 September 2011, indicates that the fragile recovery in the EU’s economy appears to have slowed, although there are significant differences between Member States. The report looks at data relating to the first quarter of 2011, which shows that the employment rate in the EU has not returned to its pre-crisis level, although the year-on-year rate has improved in most Member States. The employment rate increased only marginally, by 0.1%–0.2%, between the first and second quarter of 2011. In particular, long-term unemployment is high, at 4.1% in the first quarter of 2011.

Effects on vulnerable groups

The report notes that certain groups of workers are particularly hard hit by the labour market situation. Despite a slight reduction in the overall EU youth unemployment rate (which was 21.3% at the beginning of 2010), unemployment still affects one in five (20.7%) young people active in the EU labour market. Furthermore, the category of young people who are not in employment, education or training (NEET) is increasing.

Unemployment rates for women have been increasing over the past year, while the position for men, initially badly affected by the crisis, has improved. The male unemployment rate, at 9.3%, has been stable, while in July 2011 it increased slightly (by 0.1 percentage points) for women to 9.7%. Overall, however, men still account for 60% of the total increase in unemployment since March 2008. Consequently, the unemployment rate for men has increased by three percentage points from its low of 6.3% at the beginning of 2008, although it has decreased by 0.6 percentage points from its peak at the beginning of 2010. The unemployment rate for women has risen by a more limited 2.3 percentage points from its low of 7.4% but has not yet begun to fall.

Further, one in five active third-country migrants and 15% of active low-skilled workers are unemployed.

Atypical working

Looking at the incidence of atypical work, the report notes that the use of temporary contracts has grown over the past decade, but fell back slightly in the crisis. The number of those on temporary contracts, as a percentage of the total number of employees, rose from 12.2% in 2000 to 14.6% in 2007, falling to 14.1% and 13.6% in the two subsequent years, and rising again in 2010 to 13.9%.

Part-time employment has accounted for a significant proportion of the overall expansion in employment in the EU since 2000. The number of part-time workers, as a percentage of the total number of workers, has risen continuously, from 15.7% in 2002 to 18.5% in 2010. Between 2008 and 2010, when the number of full-time workers shrank by nearly 6.4 million, the number of part-timers rose by one million.

Differences between Member States

As stated above, there are significant differences in the labour market performances of individual EU Member States. Those that are already experiencing a lower than average unemployment rate have seen unemployment drop even further: in Germany 6.1% in July 2011 compared with 7.0% in July 2010, and in Austria 3.7% in July 2011 compared with 4.5% in July 2010. By contrast, some countries, such as Greece (15% in March 2011 compared with 13% in July 2010) and Spain (21.2% in July 2011 compared with 20.3% in July 2010), have seen persistently high or increasing unemployment.

The number of workers fell between 2008 and 2010 in all but four Member States (Germany, Luxembourg, Malta and Poland), while the unemployment rate rose in all but two (Germany and Luxembourg). The report notes that the situation is particularly worrying in the Baltic states, in Spain and in Ireland. By contrast, Germany and Luxembourg are the only Member States that have experienced both a fall in unemployment and a rise in employment during that period.

Labour market outlook

The labour market outlook would appear far from rosy in most EU Member States. Gross domestic product (GDP) growth forecasts for 2011 have been revised downwards, and the report notes that there is great danger that weaker growth may slow or even postpone the forecast labour market recovery. It says:

The trend in job vacancies remains positive in most Member States. However, firms’ hiring expectations are declining again overall and significant contrasts can be seen between sectors.

Overall, the report notes that the prospects for further improvement in the unemployment rate have waned somewhat in recent months. A full assessment of prospects for the labour market will be carried out in the Commission’s autumn forecast, due to be presented on 10 November 2011.

Andrea Broughton, Institute for Employment Studies

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