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Eurozone labour market: disparate improvements  
Louis Boisset  
Employment in the eurozone has risen vigorously since  
Unemployment is nearing a low  
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013, and the unemployment rate has dropped to a  
Eurozone, unemployment rate (% of the active population)  
1
0-year low.  
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1
3
2
1
0
9
8
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Yet broader indicators suggest that labour market slack is  
still high in some countries, since the improvement has  
not been uniform across the board.  
In the midst of an economic slowdown, the big question  
is whether the rebound in wage growth will continue.  
After the shocks of 2009 and 2013, the eurozone labour  
market has regained momentum. Over the past five years,  
more than 9 million jobs have been created. This dynamic is  
comparable to the one that existed in the five years prior to  
the crisis.  
2000  
2002  
2004  
2006  
2008  
2010  
2012  
2014  
2016  
2018  
Chart 1  
Source: Eurostat  
Employment is nearing a peak  
An overall improvement…  
Eurozone, employment rate (% of the 15-64 age group)  
1
According to the ILO definition , the eurozone jobless rate has  
Total employment rate  
Temporary job contracts as share of total employment (RHS)  
fallen continuously, to 8.1% of the active population in  
Q3 2018, from 12.1% in mid-2013. Unemployment is now at  
the lowest level in 10 years (Chart 1). This trend was partly  
driven by the economic recovery, which tended to accelerate  
over the period.  
68  
14,5  
67  
14,0  
67  
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The employment rate, which measures the employed  
population as a share of the total working-age population (15-  
13,5  
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4 age group), has also risen strongly since 2013, thanks in  
part to temporary job contracts, which now account for about  
4% of total employment (Chart 2). The participation rate,  
1
3,0  
2,5  
65  
64  
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1
which measures the active population (employed and  
unemployed) as a share of the total working-age population,  
has also been trending upwards.  
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3
6
12,0  
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018  
Chart 2  
Source: OECD, Eurostat  
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The International Labour Office (ILO) defines an unemployed person  
as someone between the ages of 15 or more who is: i) without work,  
ii) available to start work within two weeks, and iii) actively seeking  
work.  
EcoFlash // January 2019  
economic-research.bnpparibas.com  
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but disparities persist  
 Disparate trends  
Change in unemployment rates by country (%)  
Aggregate labour market trends mask major disparities  
between the eurozone’s four big economies , in terms of both  
the level and momentum (Chart 3).  
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 Germany  France  Italy  Spain (RHS)  
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Germany seems to be a unique case. German unemployment  
rate has fallen to an all-time low of 3.4%, down sharply from  
10  
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.5% in 2009. In France, where the amplitude of labour  
market swings has been much smaller, the decline has been  
very gradual. In Spain, the jobless rate has fallen by 10 points  
since 2013, but is still holding at about 15%. In Italy, the  
unemployment rate rose sharply between 2008 and 2014 in a  
deteriorated economic environment (negative growth in 2009  
and 2012), before declining at a moderate pace.  
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4
2
0
With the decline in unemployment, Germany’s employment  
rate has steadily increased to 76%, nearly 10 points higher  
than the eurozone average. In the other three big economies,  
employment rates have held below the eurozone average.  
2000  
2002  
2004  
2006  
2008  
2010  
2012  
2014  
2016  
2018  
Chart 3  
Source: Eurostat  
Percentage of part-time work is still high  
The favourable dynamics of employment in Germany have  
been accompanied by the expansion of part-time work,  
especially in the early 2000s, which now accounts for more  
than a quarter of total employment (Chart 4). Elsewhere, the  
share of part-time work is still lower, even though it is rising in  
certain countries like Italy.  
Part-time work as a share of total employment (%, at Q2 2018)  
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2
2
0
5
0
A broader definition of the underutilisation of the work force  
provides a more complete picture of the labour market  
situation. This definition includes people who are: 1) working  
part-time but would like to work more hours, 2) actively  
seeking work but who are not immediately available to work,  
and 3) available to work but not actively seeking work.  
15  
10  
5
According to this definition, labour market slack is about two  
times higher than suggested by the ILO unemployment rate,  
at about 16% of the broader active population (Chart 5).  
Excluding the unemployed, the share of part-time workers  
wanting to work more hours makes up the biggest group,  
followed by persons available to work but not actively job  
hunting. The latter group, which is particularly big in Italy,  
illustrates the number of unemployed people too discouraged  
0
Eurozone  
Germany  
France  
Italy  
Spain  
Chart 4  
Source: Eurostat  
Looking beyond unemployment  
Eurozone euro, labour underutilisation (% of broader active  
population)  
3
to look for jobs .  
 Unemployed  Underemployed part-time workers  Available, but  
not actively seeking work  Actively seeking work, but not  
immediately available  
Since year-end 2013, labour market slack (excluding  
unemployment) has been declining but remains high. The  
underemployment rate has declined sharply in Germany,  
stagnated in France and remains high in Italy.  
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0
0
0
Wage constraints  
Economic activity in the eurozone slowed in 2018, and  
numerous uncertainties cloud the medium-term horizon.  
Slowing growth could curb the decline in unemployment and  
check the wage acceleration observed since mid-2016.  
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Although labour market slack has declined over the past five  
years, it is still high in some countries and could continue to  
2008  
2010  
2012  
2014  
2016  
2018  
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squeeze wage dynamics . At the same time, the increase in  
Chart 5  
Source: Eurostat  
the share of fixed-term contracts to the detriment of open-  
ended contracts, and the high level of part-time job contracts  
could reduce the bargaining power of employees in these  
countries. All other factors being the same, with the exception  
of Germany, the acceleration in wage growth observed in the  
eurozone over the past two years could be hampered in the  
short-term.  
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Our selection of countries (Germany, France, Italy and Spain)  
accounts for three fourths of the eurozone’s nominal GDP and 70% of  
employment.  
3
Faces of joblessness in Italy: A people-centred perspective on  
employment barriers and policies, IZA, August 2018  
Assessing labour market slack, ECB Economic Bulletin, Issue 3 /  
Louis Boisset  
louis.boisset@bnpparibas.com  
4
2017  
QUI SOMMES-NOUS ? Trois équipes d'économistes (économies OCDE, économies émergentes et risque pays, économie bancaire) forment la Direction des Etudes Economiques de BNP Paribas.
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