Euro area labour market sees strong rebound in workforce: ECB

The labour force is now above its pre-pandemic level, which it reached at the end of 2022. More recently, it has converged back to its long-term pre-pandemic trend, owing in particular to the contribution from foreign workers, an European Central Bank (ECB) release said.

In June this year, the labour force stood around 3.8 million above its January 2020 level.

Detailed quarterly data from the European Union (EU) Labour Force Survey (LFS) show that migrant workers, particularly from outside the EU, played an important role in labour force dynamics during the COVID-19 pandemic.

Eurostat data show that inactivity to employment (I-E transitions) accounted for 60 per cent of the newly employed in 2022, which is in contrast to the 2011-2019 period when U-E transitions accounted for 51 per cent of the newly employed.

On an average, the newly employed are younger and have a lower level of education than incumbents. They are also more likely to be women, work part-time and have lower levels of labour income.

Labour market-specific shocks provided further labour force impetus. The rise in workers’ bargaining power is probably associated with the widespread increase in minimum wages that has helped to encourage marginal workers back into the labour force, the decline in immigration during the COVID-19 years and growing labour shortages, the release added.

The improved labour supply, in turn, is probably associated with the more recent catch-up in immigration flows.

ALCHEMPro News Desk (DS)