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March 2014 With supplements on: - Labour market transitions before and during a severe economic downturn: some evidence from microeconomic data - Trends in poverty and social exclusion between 2008 and
March 2014 With supplements on: - Labour market transitions before and during a severe economic downturn: some evidence from microeconomic data - Trends in poverty and social exclusion between 2008 and Trends in social expenditure and distributional impact of policy changes until 2013 March 2014 I 1 This Quarterly Review provides in-depth analysis of recent labour market developments. It is prepared by the Employment Analysis and Social Analysis Units in DG EMPL. A wide combination of information sources have been used to produce this report, including Eurostat statistics (see [codes] mentioned under the charts, to be used with the Eurostat data search engine: reports and survey data from the Commission s Directorate-General for Economic and Financial Affairs, national and sectoral statistics and articles from respected press sources. Employment and social analysis portal: Contact: Neither the European Commission nor any person acting on behalf of the Commission may be held responsible for the use that may be made of the information contained in this publication. Europe Direct is a service to help you find answers to your questions about the European Union Freephone number (*): (*) Certain mobile telephone operators do not allow access to numbers or these calls may be billed. More information on the European Union is available on the Internet (http://europa.eu). Cataloguing data as well as an abstract can be found at the end of this publication. Luxembourg: Publications Office of the European Union, 2014 ISBN ISSN doi: /91804 European Union, 2014 Reproduction is authorised provided the source is acknowledged. March 2014 I 2 Table of Contents Macroeconomic and employment developments and outlook... 7 Employment in the EU and its Member States Unemployment Long-term unemployment, additional potential labour force and underemployment Households' income and financial situation Productivity, wages and hours worked Labour demand: vacancies, labour shortages and hiring activity Labour market and social situation for selected groups Youth Migrants Supplements to the EU Employment and Social Situation Quarterly Review. 29 S1. Labour market transitions before and during a severe economic downturn: some evidence from micro-economic data S2. Trends in poverty and social exclusion between 2011 and S3. Trends in social expenditure and the distributional impact of policy changes until Annex 1: Real GDP growth, real GDHI growth and its main components for selected Member States Annex 2: Selected research March 2014 I 3 Executive summary The EU economy is maintaining the growth first seen in the second quarter of 2013 (+0.4% in Q4), with estimated gross domestic product (GDP) figures from across the EU indicating that a recovery has started, albeit at a relatively slow pace. At this early stage, it is difficult to assess whether and when this fragile economic recovery will bring new jobs and to what extent society as a whole will benefit. Improvements in the labour markets in Europe are still at best weak. Employment in the EU showed the first signs of stabilising during 2013, with a mild increase in the number of persons employed in the third and fourth quarters (+0.1% in both). This reflects a slow-down of the number of employed losing their jobs, though the job finding rate continues to deteriorate. It also corresponds to a slowdown in the decrease of employment in the construction and industry sectors, while the number of employed continued to grow in the service sectors. In February 2014, managers in the EU expected moderate employment growth in industry, while employment expectations in the services sector were still below their long-term average. In 2013, the gross disposable income of households continued to decline in the Euro area 1 in real terms, but at a slower pace and nearly stabilised in the third quarter, reflecting the evolution of labour market incomes and a weakening of the stabilisation impact of welfare spending. Growth in households disposable income is lagging behind GDP growth. There is a danger that the recovery will not benefit all parts of the economy equally, with a large part of households and individuals potentially benefiting only marginally, if at all, from the slightly improved economic situation. In the third quarter of 2013, real gross disposable household income remained stable overall in the Euro area compared to the same quarter in Poverty and social exclusion in the EU has deteriorated during the crisis and show little signs of improvement so far, especially in the Member States where economic conditions continued to worsen. According to Eurostat data, poverty and social exclusion continued to increase in 2011 and 2012, reflecting the deterioration of labour market conditions, as long-term unemployment increased and an increasing share of jobs do not ensure a living wage (e.g. involuntary part-time). Poverty and social exclusion are estimated to have increased further in a few countries in 2013 (according to Euromod estimates available for 10 countries), especially in countries where it was already high. Also, a recent Euromod study shows that reforms of the tax and benefit systems introduced in were progressive or neutral in 7 out of 9 countries reviewed. The prolonged economic downturn has seen households financial distress intensify in recent months, due to the need to draw on savings or borrow in order to maintain current standards of living. Households in the lowest income quartile experienced the greatest difficulty in covering their current expenditure. The market for permanent and full-time jobs has seen only slight improvement, and it is the increasing use of temporary and part-time work which has driven the rising overall employment figures. The number of part-time jobs has risen during the crisis, mostly because the job cuts which have taken place in predominantly male-oriented sectors have been followed by an increase in the proportion of the male labour force working part-time and a higher rate of transition of workers from full-time to part-time jobs. Unemployment has stabilised since mid-2013, but figures for January 2014 show that it is still at record high levels, with around 26 million people (10.8 % of the economically active population) in the EU looking for work. In several Member States, unemployment remains close to the historically-high levels first seen in the current crisis. The unemployment rate among young people fell by 0.3 % over the year to January 2014 in the EU and by 0.1% in the Euro area. Unemployment in the same period has fallen more among men than among women. Both involuntary part-time workers and the potential additional workforce (i.e. discouraged workers who are no longer actively looking for jobs but who could form part of the workforce) grew in the EU, and differences between Member States became more pronounced. Despite this 1 No GDHI in real terms available for EU28. March 2014 I 4 somewhat mixed picture, the outlook for unemployment is showing the first signs of improvement, with European consumers expecting unemployment to fall in the coming months. Young people continue to be the hardest hit by the job crisis, with the unemployment rate amongst this age group standing at 23.4 % in January 2014 for the EU as a whole. A total of 2.5 million young women and 3.1 million young men aged are currently unable to find work. In 2013, only a third of young people in the EU had a job, and many of these were on a temporary or part-time basis. Half of Member States saw an overall improvement in unemployment figures for young people, but considerable disparities continue to exist across the EU. Overall, close to 60 % of young people in the EU were not in employment in 2013, although in 9 out of 10 cases this was due to enrolment in education. The rate of growth of nominal unit labour costs continued to slow in the Euro area, increasing the risk of cost-push deflationary pressures that could damage prospects of a sustained recovery and the accompanying creation of jobs. In Spain, on the other hand, the real unit labour cost increased for the first time since the fourth quarter of Three supplements accompany this Quarterly review. The first supplement compares labour market transitions in the EU as a whole in 2010 and The analysis shows that employment stability for individual workers declined significantly by 2010 whereby a transition to unemployment was the most important destination on leaving employment. Moreover, the stepping-stone function of temporary employment (whereby workers on temporary contracts move up to a permanent contract) has diminished notably. The second supplement analyses recent trends in poverty and social exclusion. According to latest survey data, poverty continued to increase in 2012 and is estimated to have increased further since then in those countries where economic and labour market conditions have continued to deteriorate. Between 2011 and 2012, the population at risk of poverty or social exclusion increased in one third of EU-Member States, amongst them in countries with low levels of poverty and social exclusion such as the United Kingdom, Luxembourg and Austria. The at-risk-of-poverty rate remained stable on average at EU level between 2011 and 2012, hiding diverging national developments at national level. It increased especially noticeably in Greece and is estimated to increase further between 2011 and 2013 in this country and a few others. 2 The third supplement presents recent developments in social expenditure and estimates of the distributional impact of policy changes until The latest available data show that the stabilising impact of social protection expenditure remained very weak in 2013, despite a slight improvement compared to In 2013 social protection expenditure grew much less than expected, and remained below its trend, despite the further deterioration of the output gap (around -3 %). In two countries, changes to the tax and benefit system in lead to a reduction of incomes across all or most of the income distribution. In four others the overall impact on household incomes was positive, with those at the bottom of the distribution benefiting most in proportional terms. Latest labour markets trends in the EU-28 2 Eurostat statistics on poverty and social exclusion are currently available until 2012, providing information about the 2011 income distribution. March 2014 I 5 2012 Q Q Q Q Q4 Real GDP (% change on previous quarter, SAWA) (% change on previous year, SAWA) Employment growth (% change on previous quarter, SAWA) ,1 (% change on previous year, SAWA) Employment rate (15-64) (% of working-age population, NSA) NA Employment rate (20-64) (% of working-age population, NSA) NA Job vacancy rate (EU27) (% of vacant and occupied posts, NSA) Labour productivity (% change on previous year, SAWA) Nominal unit labour cost (% change on previous year, SAWA) Long-term unemployment rate (% labour force, NSA) NA 2013 Jan 2013 Oct 2013 Nov 2013 Dec Jan 2014 Unemployment rate (SA) Total (% labour force) Men Women Youth (% labour force aged 15-24) Source: Eurostat, DG EMPL own calculations. Note: SA = seasonally adjusted; SAWA = seasonally adjusted and adjusted by working days; NSA = non-seasonally adjusted; NA: not available. March 2014 I 6 Macroeconomic and employment developments and outlook The first signs of an economic recovery emerged in 2013, following the prolonged economic and social crisis. The EU economy picked up in the second quarter, with GDP growing at an average of 0.3% per quarter since then (with +0.4% in Q4). Growth has been weaker in the Euro area (EA), with an increase of 0.3% in the fourth quarter of GDP fell by 0.5% over the course of 2013 in the Euro area and rose by 0.1% in the EU. The GDP gap between the EU/EA and the US economy whose GDP rose by 0.8% in the last quarter of 2013 was the widest since 2009 (see Chart 1). GDP growth in the EU is becoming less dependent on external demand and more driven by internal demand, with private consumption contributing positively to GDP growth in all four quarters of Chart 1: Real GDP in the EU/EA and US (lhs), and % changes over the previous quarter (rhs) income (GDHI), with a direct negative impact on aggregate demand and the general living standard of the populations. In 2013, the gross disposable income of households continued to decline in the Euro Area 4 in real terms, but at a slower pace and nearly stabilised in the third quarter, reflecting the evolution of labour market incomes. However, the growth in disposable household income in Europe, adjusted for inflation, still lags behind GDP growth, and has done so since the beginning of There is a concern that the recovery is not benefitting all parts of the economy equally, with households and individuals not benefiting much from improvements in the economy. Chart 2: Disposable Household income lags behind GDP Source: Eurostat, National Accounts, data nonseasonally adjusted [namq_gdp_k] In the fourth quarter of 2013, GDP growth became positive in the majority of EU Member States, albeit that there were large differences, with negative quarter-onquarter changes registered in Cyprus, Denmark, Croatia and Finland (see Chart 3). Source: Eurostat, National Accounts, data seasonally adjusted and adjusted by working days [namq_gdp_k] Since the onset of the crisis, Europe experienced a persistent year-on-year decline in real gross disposable households 3 Eurostat news release of National Accounts data for 2013Q4 available at: 4 No GDHI in real terms available for EU28. March 2014 I 7 Chart 3: Real GDP growth in the fourth quarter of 2013, by Member States Chart 4: Real GDP change (y-o-y) vs. total employment change (y-o-y), by Member State: third quarter 2013 (top panel) and fourth quarter 2013 (bottom panel). Source: Eurostat, National Accounts, data seasonally adjusted and adjusted by working days (q-o-q) and non-seasonally adjusted (y-o-y) [namq_gdp_k]; figures for IE, LU, PT, and RO: 2013Q3 It is still too early to assess whether the recent phase of economic recovery will bring with it a significant increase in new jobs, and what type of jobs they will be. Figures from the third and the fourth quarters of 2013 show that in an increasing number of EU Member States an improving economy has not been accompanied by the creation of new jobs, as represented by the countries positioned in the north-west quadrants of Chart 4. Source: Eurostat, National Accounts, data nonseasonally adjusted [namq_gdp_k and namq_aux_pem] Note: data not available for HR in Q3 and for IE, LU, PT, and UK in Q4. Unemployment in Europe remained at a record high in January, with about 26 million people, or 10.8% (12% in the EA) of the economically active population, looking for work. Major disparities in unemployment rates (UR) between Member States exist and have been increasing since the end of 2008 (see Chart 5). The unemployment rates in the US have been falling since The divergent trends in the EU/EA and US unemployment rates are the result of both growth differentials between these two regions and a declining active labour force in the US (the total activity rate in the US declined 2.49 percentage points (pps) since 2008Q3, while increased 1.1 pps in the EU in the same period). March 2014 I 8 Euro area EU-27 EU Employment and Social Situation Chart 5: Unemployment rates in Europe (EU/EA) and US and unemployment disparities in Europe Table 1: Recent forecasts for growth and unemployment Institute date gr.'14 gr. '15 UR '14 UR '15 IMF 21-Jan NA NA NA NA Commission 25-Feb ECB 06-Mar NA NA NA NA IMF 21-Jan NA NA Commission 25-Feb ECB 06-Mar Source: Diverse forecast documents; gr. is real GDP growth in %; UR is the unemployment rate, in % of the active population. Source: Eurostat, LFS, data seasonally adjusted [une_rt_m] Note: Disparity is measured by the degree of dispersion of EU28 unemployment rates. Dispersion is the coefficient of variation calculated over the EU-28 Member States' unemployment rates. If all unemployment rates of EU MS are equal, the coefficient of variation is zero. Significant differences between unemployment rates imply a fairly wide dispersion. Outlook Steady recovery in economic sentiment The Commission's economic sentiment indicator has recovered steadily, but from a very low level, since April Confidence indicators stand now well above their longterm average, except in the service and construction sectors. Similarly, the Euro-area Purchasing Managers Index (PMI) composite output index reached its highest level in three years in February 2014, and remained above the 50-level (which separates growth from contraction) for eight consecutive months now. Forecasted growth is however not yet strong enough to make a significant dent in unemployment. Table 1 shows the recent forecasts for the EU-27 and the Euro area by the European Commission and two international institutions. Commission winter forecasts for real GDP growth remained close to the autumn forecasts with growth projections of 1.5% in the EU and 1.2% in the Euro area in 2014, and 2.0% and 1.8% respectively in The winter forecast projected a modest rise in employment (from 2014 on) and a decline in the unemployment rate to 10.4% in the EU and 11.7% in the Euro area by 2015, with cross-country differences remaining very large. The ECB unemployment forecast is similar, but less optimistic about growth in The ECB and IMF forecasts also cover 2016, with Euro area growth projections of 1.8% and 1.5% respectively. The ECB sees a small drop in Euro area unemployment to 11.4% in In February 2014, employment prospects in industry in the EU remained above their long-term average, indicating that managers in this sector expect moderate growth in employment. Employment expectations in the services sector have remained below their long-term average, both in the EU as a whole and in the Euro area. Sentiment around jobs in the construction sector has remained depressed at European level in recent years. In February 2014, managers in the construction sector reported reducing staff numbers more drastically on average in the Euro area than in the EU as a whole. European consumers expecting unemployment to fall slightly. In February 2014, European consumers expectations for unemployment at EU level over the coming months remained lower than the long-term average, indicating that they see unemployment as falling slightly in the coming months (see Chart 6). March 2014 I 9 Chart 6: EU consumers expectations for unemployment over the next 12 months and unemployment rate (scale varies) Source: European Commission DG ECFIN, Business and Consumer Surveys and Eurostat, LFS, [une_rt_m], data seasonally adjusted Employment in the EU and its Member States Decline in employment came to a halt in the second half of 2013 Employment started to show small signs of stabilising during 2013, with a slight upturn in growth (+0.1%) in the third quarter in the EU and in the last quarter in the EA. Still, falls registered in the beginning of the year weighted heavily on 2013 performance. Compared to a year earlier, employment decreased in the EU by 0.1% ( people) and by a more severe 0.5% in the EA ( people) reaching million by the end of 2013 in the EU (see Chart 7). Chart 7: Employment in the EU and the EA, (scale varies) The employment trend improved at the end of 2013 in the EU28 and in the EA where the decrease has been more severe during the past two years Prospects have improved, with employment stabilising since the second quarter of 2013, followed by two consecutive quarters of slight growth in the EU28 (+0.1% in 2013 Q3 and 2013 Q4). Over the two years to 2013 Q4, the decline in employment was more severe in the Euro area (-1.2% over the two year to 2013 Q4) than in the EU28 (-0.2%). Yet, in the last quarter, employment trends improved in both area (+0.1 % q-o-q). Employment increase
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