Employment in the eurozone is rising faster than expected according to the latest economic bulletin from the European Central Bank.
Point of view
Stronger employment growth has doubtless provided support to household incomes, but has also further weakened aggregate productivity growth
In proportion to GDP growth, employment is now rising as fast, if not faster, than before the 2007 debt crisis they say, fueled by an increase in part-time work and the service sector growing.
And that is most pronounced in places like Germany and Spain where reforms have increased flexibility in the labour market.
Those two countries have produced two-thirds of the jobs gained in the last three years.
Economic Bulletin Article: The employment-GDP relationship since the crisis https://t.co/jhZU6hEVHR— ECB (@ecb) September 21, 2016
But even as people are getting back to work quicker than earlier hoped, productivity is declining and the ECB experts believe that could have a negative effect on the eurozone’s long-term economic growth.
“Stronger employment growth has doubtless provided support to household incomes, but has also further weakened aggregate productivity growth, which was already notably weaker – even at the sectoral level – than in the pre-crisis period on both sides of the Atlantic,” the ECB said.
“These common trends in productivity growth may imply risks to the long-term growth outlook,” it added.
Another negative – average hours worked are stagnating, so more people are employed but work less than before the pre-crisis years, a sign of underemployment.
With eurozone unemployment still around 10 percent and youth unemployment above 20 percent – and much higher in some countries – policymakers have been concerned that a large part of a generation may fall out of the labour market permanently.
That would be a costly legacy of the crisis that could take decades to resolve, all the while eating into state budgets.