Will the euro area’s robust employment growth continue?

Abstract

Employment has grown strongly in the euro area since 2020. The growth in total hours worked has been more modest, because average hours worked has decreased noticeably. Employment growth has been boosted by both demand and supply factors. The unemployment rate has declined partly because of the prevailing economic conditions, but part of the decline is likely to be permanent, or structural. There has been a trend rise in the labour force participation rate of older workers, in particular, and the labour force has grown as a consequence of population growth, especially due to immigration. However, the working-age population in the euro area will start to contract in the near future. Employment growth in the coming years will depend not only on the anticipated sluggish growth in the labour supply, but also on the economic environment and how strongly digitalisation, the green transition and the ageing of the population affect the demand for labour.