The decline in the number of persons employed in the first half of 2020 corresponds to roughly 44% of the increase in the number of persons employed since the second quarter of 2013. There were 5.2 million fewer persons employed in the second quarter 2020 than at the end of 2019, a fall of 3.2%. The COVID-19 pandemic led to the sharpest contraction on record in employment and total hours worked in the second quarter of 2020. 2 Developments in employment, unemployment and hours worked Looking ahead, the pandemic is likely to accelerate the ongoing digital transformation of the euro area economy, with teleworking and the use of digital technology becoming more prominent. In the first months after the onset of the pandemic, teleworking may have supported employment and hours worked in some sectors, in particular among workers with higher levels of education. That changed with the pandemic and associated lockdowns, during which more than a third of Europeans began to telework. While teleworkable jobs accounted for 33% of employees in 2019, fewer than 10% of potential teleworkers (3.3% of employees) reported working from home either usually or sometimes. These indicators show that the labour market remained depressed in the fourth quarter of 2020, despite some recovery in employment and hours worked in the third quarter.Ī prominent feature of the pandemic was a shift from office work to teleworking. High-frequency indicators of labour demand and new hires help to shed light on the impact of the crisis on the labour market. They also help to explain why compensation per employee declined significantly in the euro area during the COVID-19 pandemic, while compensation per hour increased slightly over the same period. These schemes help to explain the adjustment via average hours worked. As euro area governments introduced containment measures to limit the spread of the virus they also devised policies to support the labour market, with a particular focus on job retention schemes in the form of short-time work and temporary lay-offs. The high take-up of job retention schemes in the euro area significantly affected labour market developments. The negative aggregate demand shock is estimated to account for about one-quarter of the decline in total hours worked, reflecting both demand constraints and possible effects of uncertainty on consumption behaviour.
This reflects both the impact of lockdowns, which forced firms to temporarily close or reduce their operations, and the decline in the labour force, potentially also reflecting some discouragement in view of the pandemic situation. An analysis via a sign-restricted structural vector-autoregressive model shows that labour supply and productivity shocks together account for about one-third of the total decline in hours worked in the second quarter of 2020. In addition, the labour force declined by about 5 million in the first half of 2020, which is half a million more than its increase between mid-2013 and the fourth quarter of 2019.īoth labour supply and aggregate demand shocks help explain the decline in total hours worked. The labour market adjustment occurred primarily via a strong decline in average hours worked. Unemployment increased more slowly and to a lesser extent, reflecting the high take-up rate of job retention schemes and transitions into inactivity. Employment and total hours worked declined at the sharpest rates on record. The euro area labour market has been severely hit by the coronavirus (COVID-19) pandemic and associated containment measures. Published as part of the ECB Economic Bulletin, Issue 8/2020. Prepared by Robert Anderton, Vasco Botelho, Agostino Consolo, António Dias da Silva, Claudia Foroni, Matthias Mohr and Lara Vivian The impact of the COVID-19 pandemic on the euro area labour market