General overview on the recent labor market and social development trends

The economic and employment outlook is negative and has worsened in recent months. If 2012 is a negative year from the perspective of employment, the small increases in GDP forecasted for 2013 will be insufficient to create employment and reduce unemployment. A more positive outlook for the labor markets is expected in 2014. The EU is currently the only major region in the world where unemployment is still rising.

The employment recovery has come to a halt and employment is decreasing. The number of people aged 20-64 in employment in the EU has decreased by 0.2 % from 2011 to 2012. In the 2008 – 2011 period employment shrank by 1,7 %, showing more resilience than the US during the same period (-5,8). However the decline has been more pronounced in the euro zone, especially in those countries, which undertook more substantial fiscal consolidation. Since the start of the economic and financial crisis in 2008, the number of jobs lost now totals 5 million, of which 4 million were lost in the euro area. The fluctuations in overall employment since the outset of the crisis have been mainly driven by part-time work and temporary contracts, but permanent contract jobs have also been affected.

 

*The rate of unemployment in EU countries

 

A positive feature is that the employment rate of older workers increased by 1.8 p.p. between 2008 and 2011 compared to a 1.5 p.p. decline in the general employment rate.

Women have also weathered the economic crisis relatively better than men with employment rates virtually at the same level as in 2008 while the employment rate of men has declined by 2.6p.p. during the same period. At the same time, the youth employment rate declined by 3.8 p.p.

Unemployment is rising again and has reached unprecedented levels in the euro area. The overall unemployment rate of the EU is currently at 10.6%, while in the euro area it reaches 11.6 %, the highest level since the birth of the EMU. In May 2012 the number of unemployed in the EU exceeded 25 million people for the first time ever and has increased by an additional 0.75 million in the quarter since then, which represents a total increase of almost 9 million since 2008. The trend in unemployment is upward in the majority of the Member States, with only six countries showing a decrease in unemployment during the last 12 months to August 2012.

 

Long term unemployment has reached alarming highs. In the second quarter of 2012 11.1 million unemployed Europeans had been unemployed for more than 12 months, accounting for 4.6 % of the active population.. This represents an increase of 4.8 million in comparison to 2008. In 2011, 70% of all long-term unemployed in the EU-27 were concentrated in the 6 largest Member States, with Spain accounting for more than 21% of the total number of long term unemployed in the EU and contributing 1.6 million to the 3.7 million increase in the number of long-term unemployed over 2008-2011

 

 

Long term unemployment has increased for all groups but mostly for young people and those with lower education levels. However the risk of becoming long- term unemployed for older workers in 2011 was more than 55% while it was only about 30% for young people. In 2011 long term unemployment among low skilled workers was four times as high as it was for high skilled workers.

 

More than one in five young people in the labor market are unemployed. The situation of youth in the labor market represents both an economic and a social emergency with 5.52 million young people unemployed. Over the last 12 months, the unemployment rate for young people increased in the large majority of Member States and in two Member States has remained in levels above 50% and above 30 % in six.

 

Early school-leavers face bleak employment prospects. Early school leavers are arguably the most vulnerable subgroup of Europe’s young workforce. Across the EU, more than half of young people dropping out of school are unemployed. Early school leaving remains more frequent among young people from disadvantaged backgrounds, among migrants and ethnic minorities such as Roma and among boys.

 

The proportion of young people who are neither in employment, education, nor in training (NEET) continues to increase. More worryingly, increases were higher in those Member States which already had higher levels. In spite of the larger increase registered by young men, youth NEET rates remain higher for young women in almost all European countries.

 

The gap between Member States in employment and social indicators is widening.

This is particularly visible between the Southern and peripheral European countries. The Member States which have shown better resilience so far are mostly the Northern and central European countries. The shocks appear to be asymmetric but very often countries with relatively un-segmented labor markets, strong welfare systems and an ability to temporarily adjust working hours and working time (internal flexibility) have fared better.

 

Real compensation per employee declined in about half of the Member States in 2011 and expanded at a rate below that of productivity, confirming the trend initiated in 2010 of a declining wage share. Nominal unit labor costs developments differ somewhat across Member States. In general, unit labor cost developments are increasingly following patterns supportive of external re-balancing with an increasingly clear differentiation between countries with stronger needs to reduce unemployment and rebalance external positions and countries with a more sustained recovery and current account surpluses.

 

The share of the EU population reporting that their households are experiencing financial distress remains historically high, having generally edged up further over recent months.

The evolution of the depth of poverty confirms that those at risk of poverty are getting poorer in many countries, especially those where the overall risk of poverty rates is high. In 2010 in the EU, the median income of people at risk of poverty was 22% lower than the poverty threshold, evidencing a deepening of the poverty gap in most Member States since 2008.