Unemployment is falling or remaining at low levels in most OECD economies, although some experts are beginning to notice the slowdown.
The positive progress in the labor market is part of the good economic news for developed countries. In most cases, unemployment has fallen in recent years, or it remains at a steady minimum. While some threats on the horizon are causing some anxiety, the overall picture is rosy. This is the situation in some of the highest-income OECD countries.
The United States: record-low unemployment
Just walk through the streets of any city in the United States, and you’ll find job offers on every corner: in stores, restaurants, at the movies, at the bank. Job creation has exceeded all expectations in the last two years.
Despite interest rate hikes — which have cooled demand, borrowing and investment — the world’s largest economy has been generating new jobs for 33 consecutive months. There have been 14.4 million jobs created at a record pace. As a result, the unemployment rate has been able to remain below 4% for 20 consecutive months. This is the best streak in half-a-century, although the unemployment rate rose slightly between April and September, from 3.4% to 3.8%.
There are currently a record 161.6 million employed people in the United States, with 6.4 million unemployed and 9.6 million vacancies available, according to the latest data from the Bureau of Labor Statistics. The Federal Reserve expects the unemployment rate to rise to 4.1%, in 2024, as the tightening of monetary policy takes its toll on economic activity. For now, however, the reality of the labor market has been defying all forecasts. Even employment rates in leisure and hospitality — the sectors most affected by the pandemic — have been breaking records.
Germany: employment remains high, despite little economic growth
The unemployment rate remains stable in Germany: around 3%, the same as in 2019. Germany also has the lowest youth unemployment in the European Union, at 5.7%, which is well below the EU average (14%). The German labor market is resisting despite an economic slowdown, which will make the great European industrial power the only industrialized country that won’t grow in 2023.
High inflation, rising interest rates and lower-than-expect export figures “are noticeable in the [German] labor market, but if we measure [the unemployment rate] with respect to the weakness of the economy, it remains comparatively good,” affirms Enzo Weber, analyst at the Institute for Employment Research (IAB). That being said, a report from the institute estimates that the number of unemployed Germans will increase this year.
If there’s an obstacle that threatens the strength of the German labor market, it’s the lack of qualified personnel. Both economists and the government agree. Labor Minister Hubertus Heil has estimated that a gap of seven million workers is feared by 2035. German companies would need to recruit 400,000 people from outside the EU each year. This is why Berlin has just reformed its immigration law to attract non-EU citizens. The German government is also trying to incorporate Ukrainian refugees into the labor market as quickly as possible.
France: the lowest unemployment rate since the 1980s
Never since 1982 has the unemployment rate been as low as it is now in France: 7.2%. French President Emmanuel Macron boasts of having created 1.7 million jobs in the private sector since he came to power in 2017. There are currently 367,000 vacant jobs in firms with more than 10 employees. For the first time in decades, unemployment — a central issue in French political debate since the 1970s (and an evil that seemed endemic) — has ceased to be a reason for discussion.
The causes of the decline in unemployment, for the most part, have little to do with France, as this phenomenon is taking place across several countries. One reason for the strong jobs numbers is that the working-age population is stabilizing after decades of increasing. There are simply fewer people competing for jobs. But there are also some particular causes for relatively low unemployment in France. Macron often points to corporate tax cuts — which actually began under his predecessor, the socialist François Hollande — and successive labor reforms.
Macron’s goal now is for France to reach full employment by 2027, the year he will leave power. If he meets his objective, that means that the rate would fall to 5%. The forecasts for the end of 2023, however, point to a slight increase in overall unemployment this year, which is partly explained by the economic situation. Also, according to Le Monde, with the pension reform that has just come into force and with the increase in the retirement age, French workers will now be spending more time in the labor market, closing doors to newer workers.
United Kingdom: signs of rising unemployment
The United Kingdom has been sailing against the current for several years — with respect to the EU or the OECD — when it comes to its macroeconomic data. And unemployment is no exception. However, if the data from the two aforementioned blocs point to an improvement in employment compared to 2019, a cooling of the labor market has been recorded in British territory in recent months. The current unemployment rate is 4.3%, half-a-point below the OECD average. It’s a low index, although it’s risen by three-tenths compared to the previous quarter.
Relevant analysis centers, such as the Institute for Fiscal Studies, predict an increase in unemployment that may reach 5.8% by the end of 2024. The slight reduction in business activity has caused the number of job vacancies to decline. Meanwhile, rising average salary increases continue to transmit inflationary pressure to the Bank of England, something that has raised concerns among analysts.
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Italy: tourism as an economic engine
The labor market in Italy is progressively improving. The country has experienced a marked drop in unemployment in recent months. The unemployment rate stood at around 7.3% in August (0.2% less than the previous month) — one of the lowest recorded in the last 14 years.
Italy’s tourism sector has contributed substantially to these good results. Of the 523,000 new jobs that were filled in August, 130,000 came from this sector. The occupancy rate of hotel rooms in August was 61.5%, about 2.3% higher than in August 2022.
Italy has had a problem of unfilled job vacancies in recent years, due in part to low salaries that are also barely increasing. In the second quarter of this year, the vacancy rate remained stable at 2.1% and increased slightly in the services sector. Italy expects GDP to grow in both 2023 (1.2%) and 2024 (1.1%), although more slowly than in 2022 (3.7%). The government predicts that employment will increase in line with GDP and also predicts a decrease in the unemployment rate. Although the positive results in the labor market are encouraging, some challenges remain, such as the low participation of women and youth in the workforce.
The Netherlands: pressing labor needs
In September, unemployment rose to 3.7% in the Netherlands, while youth unemployment — looking at those between 15 and 25-years-old — has increased in the last quarter, reaching 8.8%. According to the Central Statistics Office, the general rise in figures responds “to the deterioration of the economy in recent months.” This August, the country’s workforce totaled 9.7 million people, the majority men (56%). The government’s financial digital portal estimates that there are more than 11 million jobs in the country and seven out of every 10 citizens between 15 and 75-years-old are employed.
On the other hand, the tendency to work part-time is the option chosen by 4.5 million people in the Netherlands. Hence, the average number of hours worked per week is one of the lowest in the EU, at 32.1. In the last two decades, the number of Dutch people between 45 and 75 with a job has increased by 1.6 million. This is due, in part, to the federal government’s effort to delay the retirement age. In 2023, it will be 66 years and 10 months. By 2028, it will rise slightly, to 67 years and three months.
Government studies indicate that the Dutch economy gained momentum after the pandemic, while a significant part of the vacancies (the country suffers the highest job vacancy rate in Europe, at 4.7%) respond to the ups and downs of the economic cycle. Furthermore, both an aging population and climate change will increase the demand for labor. The first shift will be noticed in the health sector. The other will translate into problems in carrying out the green energy transition, “given that generating renewable energy requires more labor than fossil energy,” as explained by the official government portal.
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ARTICLE BY: Miguel Jiménez, Elena G. Sevillano, Marc Bassets, Rafa de Miguel, Lorena Pacho and Isabel Ferrer, El Pais | Published: 10/23/2023