EUROSTAT data on the labour market situation in the second quarter of 2020 shows that, despite the dramatic developments resulting from the Covid-19 crisis, average unemployment in the EU declined somewhat compared to the previous year while the unemployment rate remained at the same level as in the second quarter of 2019. This information does not therefore adequately represent current changes on the European labour market. A significant proportion of those who lost their job were not able to actively seek employment due to a lack of job offers and lockdown restrictions or were unavailable for work as they were caring for children or family members. These individuals do not count as unemployed under the ILO definition. Additional indicators were therefore calculated and published to capture the most recent developments on the labour markets in the European Union. Labour Market Bulletin Number 10 described the rapid increase in temporary lay-offs due to short-time work (absences from work) and the decline in total actual hours worked. Now we would like to present an additional indicator here.
The term total labour market slack (in the age group 20 to 64) comprises the following groups on the labour market: unemployed persons, underemployed workers, persons seeking work but not immediately available and persons available to work but who are not seeking due to the current situation. The latter group in particular recorded a significant increase of 56% across the EU compared to the same period in the previous year.
Figure 1: Components of labour market slack in the EU 27: Q2 2019 and Q2 2020 in thousands
The term extended labour force comprises the sum of the labour force plus the potential labour force which is defined as all persons of working age who, during the reference week, either carried out activities to seek employment but were not available to work or who were available but did not carry out activities to seek employment.
Average labour market slack as a percentage of the extended labour force in the EU-27 amounted to 14.0%, 1.4%-points higher than in the second quarter of 2019. This percentage rose in almost all member states of the PES network, in Iceland by 4.3 percentage points, in Austria by 3.6 % points and in Ireland by 3.5 % points.
Figure 2: Total labour market slack as a share of the extended labour force in the member states of the PES network: Q2 2019 in percent and change compared to Q2 2020 in percentage points
Employment and unemployment show the following trend: Whereas in the first quarter of 2020 employment rose slightly compared to the same period in the previous year, in the second quarter of 2020 employment declined by 2.4% or 4.7 million compared to the previous year. However, unemployment also declined in the second quarter of 2020, with the unemployment rate in the EU-27 remaining stable at 6.7%, the same level as in the second quarter of 2019; in some countries it even declined.
However, in recent months, the monthly unemployment rate has shown an upward tendency and in September 2020 was on average 0.9 percentage points higher than in September of the previous year. Looking at the development of employment and unemployment, the number of temporary lay-offs due to short-time work (Labour Market Bulletin November 2020) as well as the number of people not looking for work due to a lack of employment opportunities, provides a more meaningful picture of developments on the labour market in the member countries of the PES network.