With European furlough schemes winding down, what is the labour market outlook from here?

Labour issues in Europe have hit the headlines in recent weeks, with shortages of lorry drivers causing major problems in the UK, huge queues at petrol stations and shops warning that there are only days to “save” Christmas.

01 Oct 2021

Against this backdrop and with European furlough schemes winding down, we take a look at the state of play in the European labour market and potential implications for the policy outlook.

The European labour market is improving faster than expected

Employment in Europe was up 0.7% quarter-on-quarter and 1.8% year-on-year in Q2, but the increase in the number of hours worked was much more spectacular: hours worked were up 2.7% quarter-on-quarter and 17% year-on-year (the big discrepancy between employment and hours worked is essentially due to the reintegration of workers previously on furlough schemes). Meanwhile, euro area unemployment continued its descent: it fell to 7.6% in July – nearly a percentage point below its peak in Q3 last year and just 30 basis points above its all-time low of 7.3%.

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