Crisis Response Monitoring Country comparison

The initial impact of the COVID-19 crisis was steep and rapid. In its first two months, March and April of 2020, Canada lost more than three million jobs from a workforce of just over 19 million. The worst months were April and May, and the bounce back was initially robust with nearly 2.4 million jobs added between May and September. However, there was a slowdown in the rate of recovery between September and October as the second wave of COVID-19 grew. Overall, as of October 2020 (the most recent data available), employment levels remain just over 635,000 workers below the February peak.

The Canadian government’s support for the labour market and the economy in general is put into perspective by an economic statement issued on November 30, 2020 by the federal government, and a July fiscal snapshot. In light of the COVID-19 crisis, the November statement projects the federal debt to gross domestic product (GDP) ratio to be just under 51% in the current fiscal year, rising to nearly 53% in 2021–22 (see section below on fiscal viability). Interestingly, the federal government indicated these recently announced measures are time-limited and bound by the health of the economy, which will be measured by, among other things, the employment rate, total hours worked and the level of unemployment.

In examining the evolution of employment and unemployment rates during the pandemic, some concerns have been raised about how comparable these recent trends are to historical norms given that the share of the employed reporting zero hours has also increased dramatically. Thomas Lemieux and colleagues report that by April 2020, a 32% decline in hours worked coincided with a 15% decline in overall employment.

COVID-19’s labour market impacts have been uneven on several dimensions, especially age, wage, sector/industry, immigration status, gender and geography, as seen in Table 1, which looks at February to October changes. The most dramatic differences are across industries, where accommodation and food services; arts, entertainment and recreation; and transportation and warehousing, were particularly hard hit whereas (for example) finance, insurance, real estate, rental and leasing were little impacted. Low wage workers (in the first 25th quartile of earnings) and those with less education were also more negatively affected in terms of employment. To some extent, this reflects the sectoral composition of employment losses, meaning that the sectors most affected by the pandemic such as accommodation and food services, tend to employ younger, lower-educated workers and the wages tend to be below the median. Each of these groups most impacted by job losses has also been slow to recover, with employment levels remaining well below their pre-crisis levels of February 2020.

Figure 1 shows the dramatic impact on young workers by contrasting the unemployment rate for three age groups. To provide perspective, on the left-hand side are the unemployment rates since 1976, and on the right is a magnified view since January 2018. The extreme unemployment rate for young workers during the COVID crisis relative to historical recessions is noteworthy. In contrast, for workers aged 25–54 and 55 and over, COVID-era unemployment rates are comparable to those experienced during previous recessions. Figure 2 similarly addresses the employment rate and again shows the relatively large decline for young workers.

Figures 3 and 4 undertake a similar exercise as Figures 1 and 2, but for females and males. As seen on the right-hand side of Figure 3, at the onset of the pandemic (April and May 2020), the female unemployment rate jumped from somewhat lower to slightly higher than that for males. This led to an initial narrative about females being harder hit, which was true. However, in the recovery starting in June 2020, the female unemployment rate declined more quickly than that for males. The uneven changes in unemployment for both females and males follow in part from the gender composition of the industries most affected by lockdowns and physical distancing requirements. Figure 4 tells a similar story about employment rates by gender, but also raises a serious concern for the future. On the left of Figure 4, we see that female employment has recovered, or at least not been permanently reduced by recent recessions, whereas male employees appear to have experienced more permanent effects from recessionary shocks. This issue requires careful attention going forward.

Although the second wave of COVID-19 has been geographically dispersed, the initial impact was concentrated, with a few major urban areas disproportionately affected. On this dimension, provincial government reactions play a role in labour market outcomes. Canada is a decentralized federation with two constitutionally recognized orders of government (not levels — neither has authority over the other): federal (national) and provincial (regional). Healthcare is almost entirely a provincial responsibility although the federal government has influence by virtue of fiscal transfers to the provinces. Most labour markets are also the responsibility of the provinces. The federal government has responsibility for a very limited set of industries including banking, interprovincial transportation and the military. This means that business restrictions, social distancing and mask wearing are the responsibility of provinces. Substantial differences in provincial policy approaches due to differing local conditions have been seen throughout the pandemic.

Despite having less formal responsibility than the provinces for labour markets, the federal government has greater fiscal capacity relative to its responsibilities and has constitutionally protected “spending power.” It runs the national Employment Insurance (EI) program (called unemployment insurance in some countries), and during the COVID-19 crisis it established a wide array of short-term and one-time benefit programs, discussed below. Almost all COVID-19 labour market–oriented direct transfers to residents and employers originated with the federal government, although a few were cost-shared with the provinces.

1. “Labour Force Characteristics, Monthly, Seasonally Adjusted and Trend-Cycle, Last 5 Months,” Statistics Canada, Table 14-10-0287-01, https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410028701.
2. https://www.canada.ca/en/department-finance/news/2020/11/government-of-canada-releases-supporting-canadians-and-fighting-covid-19-fall-economic-statement-2020.html
3. https://www.canada.ca/en/department-finance/services/publications/economic-fiscal-snapshot.html
4. Stephen R.G. Jones, Fabian Lange, W. Craig Riddell, and Casey Warman, “Waiting for Recovery: The Canadian Labour Market in June,” Canadian Public Policy 46, no. S2 (2020): S102–S118, https://www.utpjournals.press/action/showCitFormats?doi=10.3138%2Fcpp.2020-078.
5. Thomas Lemieux, Kevin Milligan, Tammy Schirle, and Mikal Skuterud, “Initial Impacts of the COVID-19 Pandemic on the Canadian Labour Market,” Canadian Public Policy 46, no. S1 (2020): S55–S65. https://www.utpjournals.press/doi/full/10.3138/cpp.2020-049.
6. In contrast, municipal governments are creatures of provincial governments and represent a lower level of government over which the federal government has no direct responsibility. Canada also has three territories with very small populations; they have ties to the federal government but are treated similarly to provinces.

France started a rigorous lockdown on March, 17, 2020. Schools, restaurants and all shops except pharmacies and groceries were closed. Mobility was authorized for a limited list of motives explicitly listed by a decree released on 24 March. Those who moved were required to have an authorization from their employer or a sworn statement indicating the reason for the trip. Violation of these rules is liable to a fine from 135 euros to 3750 euros and 6 months imprisonment. The rules were stringent: The government announced 15 days after the start of containment that there had been 5.8 million checks and 350,000 fines.

The lockdown started to be released from May 11, but very gradually, with a limited reopening of schools and shops depending on sectors and regions. Restaurants and cafés remained closed until June 2 and schools until the end of June.

As a consequence of this very stringent lockdown, economic activity has slowed sharply in April 2020. The estimate of the loss of economic activity linked to the health crisis is around 28% in April, as shown by Figure 1. However, the rebound in economic activity was very strong from the start of the deconfinement, in May and then in June. It continued, albeit at a slower pace, during the summer months.

At the same time, for several weeks and after a lull during the summer, the spread of the virus has intensified, particularly in large cities. The implementation of new measures to limit social interactions started in mid-October with a second lockdown, less stringent than the first one insofar as schools remained open and people could commute for professional reasons.

However, activity rebounded after the end of the first lockdown, from the third quarter of 2020 (see Figure 1). On average over the year 2021, GDP increased by +7.0% after –8.0% in 2020. The average level of GDP in 2021 is thus 1.6% below its average level in 2019 and the quarterly GDP of the last quarter of 2020 is just above that of the pre-crisis.

Employment

Thanks to a very intensive use of short-time work, which covered about half of employees of the private sector at the end of April 2020 (Figure 2), the employment drop has been limited (Figure 3). Between the end of December 2019 and the end of June 2020, salaried employment decreased by 715,000, or -2.8%. This decline, which is unprecedented in magnitude, remains much more limited than the decline in activity (-13.8% in the second quarter after -5.9% in the first). The drop of employment has mainly been due to the freeze of hiring. Hence, young people, have been more impacted whereas the employment rate of senior workers remained almost stable. Then, employment recovered rapidly, and by the third quarter of 2021 the aggregate employment rate is 2 points above its level at the start of the pandemic.

Unemployment

During the period of confinement, a large number of unemployed persons had interrupted their search, leading, despite the decline in employment, to a decline in the number of unemployed persons as defined by the International Labor Office, which dropped to 7.1% in 2020q2 (Figure 4). This effect largely faded away in the third quarter of 2020, where the unemployment rate raised sharply up to 8.9%. But this increase was short-lived. The unemployment rate fell to 7.8 in the fourth quarter of 2020 and then remained stable at this level until the end of 2021. The unemployment rate of young people increased more than that of other age group in the beginning of the pandemic. However, this increase was also short-lived. The youth unemployment rate dropped sharply from the third quarter of 2020 and is slightly lower than its pre-crisis level at the end of 2021.

1. Travel between the home and the place of exercise of the professional activity, when they are essential for the exercise of activities which cannot be organized in the form of telework or professional displacements which cannot be deferred; Travel to make purchases of supplies necessary for professional activity and purchases of basic necessities in establishments whose activities remain authorized; Consultations and care that cannot be provided remotely and that cannot be deferred; Care of patients with long-term conditions; Travel for compelling family reasons, for assistance to vulnerable people or childcare; Brief trips, within the limit of one hour daily and within a maximum radius of one kilometer around the home, linked either to the individual physical activity of the people, to the exclusion of any collective sporting activity and any proximity to other people, either walking with the only people in the same home, or the needs of pets; Judicial or administrative summons; Participation in missions of general interest at the request of the administrative authority.

Forecasts on the economic impact of COVID-19 released in March 2020 had been rather optimistic, especially concerning the labor market impact (e.g., Michelsen et al. 2020a, Sachverständigenrat 2020a). However, assessments released until June 2020 were significantly more negative: For example, the federal government and the German Council of Economic Experts expected GDP to fall by 6.3 or 6.5 percent in 2020 by that time (Bundesregierung 2020a; Sachverständigenrat 2020b). Forecasts from September and October 2020, which had been released before the reinstatement of a national (partial) lockdown in early November, expect GDP to decline by up to 6 percent in 2020, but these assessments are generally again more optimistic and argue in favor of a V-shaped recession with economic recovery in 2021, involving GDP growth of 4 to 5 percent in that year (Bundesregierung 2020b; Michelsen et al. 2020b; Wollmershäuser 2020.

Table 1 displays selected statistics for the labor market impact of COVID-19 until October 2020 (currently the most recent available data). In that month, the number of registered unemployed stood at 2.75 million persons, an increase by 25 percent compared to October 2019. A decomposition exercise shows that about a quarter of the COVID-19 impact on unemployment is due to relatively fewer underemployed persons (e.g., as active labor market policy measures have been substantially reduced, individuals who would have otherwise been excluded from official statistics are now counted as registered unemployed), an additional quarter is due to increased layoffs, and about one fifth is due to reduced hiring activities (BA 2020a). Employment in Germany, however, has not declined significantly yet; and it appears as if the COVID-19-induced rise in unemployment has been stopped for the time being – there has been practically no additional COVID-19 impact on unemployment since July 2020.

However, short-time work (STW) is still extensively used in Germany, and the future employment perspectives of these short-time workers are – at least to a certain extent – unclear. Figure 1 shows that following a peak in April 2020, when the number of short-time workers reached almost 6 million, their number still stood at 5.9 million in May 2020, but decreased to about 2.6 million until August 2020. This also means that STW in the current crisis has reached significantly higher levels than during the Great Recession where the peak was at about 1.5 million short-time workers (Brenke et al. 2013). Although these numbers still involve a larger degree of uncertainty, are only reported with substantial time lag and may be subject to revisions, also the most recently available updates and forecasts indicate a continuous decline (ifo 2020a), implying that the share of short-time workers among all employees that are subject to social security contributions fell from a peak of 20 percent in April 2020 to about 10 percent in October 2020.

Business confidence stood at a historical low in April 2020. It has been increasing since then until September 2020, when it slightly dropped again in October 2020 (ifo 2020b, ifo 2020c). Yet, unemployment figures not only increased because of increased layoffs, but to a similar extent also because of firms’ reduced hiring activities, resulting in fewer exits from unemployment (Bauer and Weber 2020). The demand for new workers had literally collapsed, especially in April and May 2020, when the number of vacancies declined sharply (BA 2020a; Bossler et al. 2020). Compared to one year before, the stock of posted vacancies is still more than 20 percent lower in October 2020 (Table 1). Labor demand is thus low, but it has stabilized for the time being.

Unemployment risks are particular high in some sectors, including hotels and restaurants, retail, various other service sectors, and to some extent even health and logistics (BA 2020a). These sectors have been either directly affected by restrictions on economic activities and social contacts, or indirectly via disrupted value chains, or simply by a sharp drop in demand. However, quite a few sectors in the German economy remain relatively unaffected (e.g., the public sector, the finance sector, education, and agriculture; BA 2020a). In terms of most vulnerable groups, employment losses can be expected to be particularly concentrated among workers with fixed-term contracts, temporary agency workers, marginal part-time workers, self-employed and freelancers. For example, one in four solo self-employed workers considers it very likely they will have to give up their own solo self-employment within the next twelve months (Bertschek and Erdsiek 2020). The crisis also poses an additional challenge for the labor market integration of the recent cohort of humanitarian migrants that arrived in Germany after 2015.

Firms with liquidity problems already before the current crisis are at a high risk of bankruptcy. This risk may be particularly concentrated among SMEs with severely restricted economic activities, such as restaurants, small retail shops, and travel agencies. But it appears too early for an assessment: Due to changes in insolvency law, the precise extent to which these firms will ultimately go out of business will only become apparent in early 2021.

From the current perspective, a scenario therefore appears plausible – also when considering other factors and ongoing developments – in which the number of unemployed in Germany continues to rise towards 3.5 million by spring 2021 (starting from 2.75 million in October 2020). The volume of STW is likely to decline further in the course of 2020, but may still correspond to around two million employees by the end of 2020. However, this figure could only gradually decline in the course of 2021 because the maximum period during which STW compensations are paid has been extended to 24 months. Hence, also an increase of hidden unemployment can be expected (on the one hand due to STW, on the other hand due to increased withdrawal from the labor market).

1. Such revisions already happened. For example, the number of short-time workers in May 2020 has been revised from 6.7 million to 5.9 million, and later to 5.7 million (BA 2020b, 2020c, 2020h).
2. The obligation to file for insolvency had initially been suspended until September 30, 2020 for firms which are suffering economic difficulties or have become illiquid because of COVID-19 (under specific conditions, see KPMG Global 2020 for details). This suspension will be extended until December 31, 2020 (the legislative process is currently ongoing).

In March 2020, Italy’s industrial production fell almost 30% and GDP contracted 4.7% as a consequence of the lockdown measures. In April 2020, Italy hit a new record low for industrial production, which contracted by 19.1% relative to March. However, the effects of the lockdown on employment levels have not yet manifested; the cushion provided by social safety nets and the suspension of the layoffs have limited the short-term effects of COVID-19 on the labor market. At the end of March 2020, the National Institute of Statistics (ISTAT) registered a decrease in the unemployment rate relative to March 2019, i.e. -11.1%, while the employment rate only decreased by 0.1%. The decline in unemployment continued in April, reaching the lowest figure since 2007; this however reflected a considerable increase in the number of economically inactive people, as shown by the figure below. At the same time, the employment rate in April only decreased by 1.2% with respect to March 2020. Since July 2020, employment has started growing at a constant rate (+0.4% on a monthly basis). However, employment levels in August 2020 are still 1.8% lower than the ones registered in August 2019. The drop in the number of employed is largely due to fixed term contracts not being renewed. Figure 1 further shows that the unemployment rate has increased since June 2020; this is mainly driven by the decline of the number of inactive workers in the third quarter of 2020 (-4.1% relative to Q2 2020).

Italy has adopted sectoral lockdown measures to contain the spread of COVID-19: the government decided to shut down non-essential businesses, involving almost 8 million employed people. Workers employed in financial, banking and insurance sectors, as well as in public administration and professional services could continue their activity from home. On the contrary, workers employed in manufacturing, construction, tourism and retail suffered the most (Barbieri et al. 2020). In April 2020, the Italian Social Security Administration (INPS) registered an increase in the requests for subsidies for temporary reductions of hours worked (i.e. Cassa Integrazione Guadagni) of about 2,953% with respect to April 2019. ISTAT estimated that in the second quarter of 2020 hours worked decreased by about 20% with respect to the 2019. Further, the Italian GDP has registered a quarter-over- quarter decline of 12.8%.

1. https://www.istat.it/it/archivio/244211
2. https://www.istat.it/it/files//2020/04/Occupati-e-disoccupati-marzo-2020.pdf
3. https://www.istat.it/it/files//2020/10/Occupati-e-disoccupati-agosto-2020.pdf
4. https://www.istat.it/it/files/2020/09/Mercato-del-lavoro-II-trim_2020.pdf
5. https://voxeu.org/article/covid-19-workerss-exposure-risk-and-lockdown
6. https://www.istat.it/en/archivio/247057

Employment has recovered from the large drop that occurred last year (Figure 1 left). During the months March through May 2020, the number of persons employed declined by over 200 thousand persons. When restrictive measures were lifted step by step, a gradual recovery set in that, somewhat surprisingly, continued more or less uninterruptedly during the second wave of the pandemic. After May 2020 monthly declines in employment occurred only in September 2020 and March 2021. During the months June 2020 through July 2021 employment increased by 17 thousand persons per month on average, bringing the level to over 9 million persons in July. The number of persons employed now slightly exceeds the number reached in February 2020, just before the onset of the pandemic in the Netherlands.

In the period March-August 2020 the number of unemployed persons increased by over 150 thousand persons. In August 2020 the unemployment rate peaked at 4.6% of the labour force. Since then it has come down steadily to 3.1% in July 2021, increasing just slightly to 3.2% in August 2021, only 0.3%-point above the historic low of 2.9% recorded in February 2020. Gross labour participation stood at 71.6% of the population in July 2021, a record high since 2003, the first year of the time series that is currently available. Last year already participation veered back quickly, but not fully, after the steep decline that occurred between February and May (from 71.4% to 70,2%). It remained below its pre-crisis level until July 2021.

Workers that became unemployed during the COVID-19 crisis so far were typically young, had a low or intermediate level of educational attainment, had a non-western migration background and/or were working on a non-standard type of labour contract. For most of these groups, labour market conditions have improved considerably by now. Unemployment among those with a non-western migration background now is lower than it was when the COVID-19 crisis started. However, unemployment among those 15 to 25 years of age is still 1.0%-points higher now than it was in February 2020. In the second quarter of 2021, unemployment among those with a low level of educational attainment was also 1.0%-points higher than it was in the first quarter of 2020. During the first wave of the pandemic, workers with non-standard labour contracts were hit particularly hard, whereas those with open-ended contracts have fared relatively well all along (Figure 1 right). In the second quarter of 2021 the number of workers with non-standard contracts was 115 thousand lower than it was in the first quarter of 2020, while the number of workers with open-ended contracts was 96 thousand higher. Over the same time period, the number of self-employed has risen by 38 thousand, but provisional data indicate that hours worked by the self-employed decreased substantially last year and the self-employed are still working fewer hours now than they did before the crisis.

The dramatic fall in employment in April 2020 (160 thousand persons) was preceded by a remarkable shortening of the working week. After the start of the first lockdown in March 2020, the average number of hours worked per week (per worker) went down by 12% (4.0 hours per week; Figure 2 left). In April and May 2020 the number of hours worked continued to fall, to a level 18% below that in early March (5.9 hours per week). In June, after the first wave, there was a slight recovery of hours worked per week that coincided with relaxations of restrictive measures. The number of hours worked was at nearly the same level in September 2020. From September to December 2020 however it rose by 5%, to a level that was still 10% below that of early March 2020 (3.1 hours per week). This increase occurred in spite of the reinstatement of restrictive measures, first a partial lockdown in October 2020 followed by additional measures in November 2020. In October 2020 the government made an urgent appeal to everyone to work from home again as much as possible. While in April 2020 more than half of weekly working hours were spent at home instead of at the workplace, by September 2020 the part spent at home had fallen to about a third. In December 2020 it had risen again, to about 40%. By far the largest fall in labour volume (total hours worked) occurred in business services (Figure 2 right).

The availability of effective vaccines seems to have changed the course of the pandemic dramatically in the Netherlands, though uncertainty about the lasting effectiveness of vaccines against existing and new strains of the virus and the possible need for booster shots and new vaccines remains. After a rather slow start in the beginning of this year, the vaccination campaign gained considerable speed. However, the vaccination rate now seems to plateau at about 80 percent of the population over 12 years old, which still leaves about 2 million people unprotected. Nonetheless, on September 14th 2021, the government announced that most restrictive measures (social distancing, the recommendation to work from home, restrictions on cultural and sports events) will be eased or lifted altogether on September 25th. So far this has not resulted in a new surge in cases in the Netherlands.

Returning to the labour market, labour demand has recovered so strongly that labour market tightness is increasing fast. The unemployment rate is almost as low as it was when the crisis started, and pressure points that existed before the COVID-19 crisis resurface. Macroeconomic indicators of labour market tightness all show the same pattern: the number of vacancies, the vacancy rate (number of vacancies per job held by employees), and the ratio of vacancies to unemployed peaked in the course of 2019, dived during the first half of 2020, and have been rising since, reaching record levels in the second quarter of 2021. The number of vacancies currently exceeds the number of unemployed, which has not happened in 50 years. Labour shortages are ubiquitous. Scarcity seems to be most pressing in education, ICT services, the health care sector and technical professions.

Between March and May 2020

Portugal declared the State of Emergency over coronavirus on March 18. According to data provided by the Portuguese Institute of Employment and Professional Training (IEFP, 2020), in May (March) 2020 the number of registered unemployed in mainland Portugal increased by 4.2% (9.6%) comparing to April (February) and by 36.2% (3.7%) comparing to May (March) 2019. This increase is mainly due to the increase of registered short-term unemployed (less than 12 months). Amongst the registered unemployed in May, 45% were males and 55% females. However, despite the greater share of females in the group of unemployed, the observed increase between May 2020 and May 2019 was larger for males (39.5%) than for females (33.7%).

Workers without a higher education degree were the most affected at this initial stage of the crisis, for whom we observe an average increase in registered unemployment of 38.3% between May 2020 and May 2019 – which contrasts with an increase of 22.8% for workers with a university degree. There are no significant differences by gender across levels of educational attainment.

Considering occupations, the worst hit groups were: Plant and machine operators and assemblers (62% increase comparing to May 2019); Sales and services workers (50% increase); Craft and related trades workers (42% increase); and Clerks (36% increase).

Unemployment increased by 10% between February and March 2020 in the three main sectors of economic activity. This initial situation changed during May 2020 (full month in lockdown). Compared to May 2019 the number of registered unemployed increased by 13.5% in the primary sector, by 27.8% in the secondary sector, and by 44.7% in the tertiary sector. These averages, however, hide great differences across the activities that compose the sectors. For example, within the manufacturing sector the worst hit activities were: Motor vehicles (45.9% increase, comparing to May 2019); Manufacture of basic metals and of fabricated metal products (45.4% increase); Textile, clothing and leather industries (43% increase); and Petroleum, chemical and rubber manufacturing (34.5% increase). Amongst the services sector the worst hit activities were: Lodging, restaurants and hotels (89.3% increase compared to May 2019); Transports and storage (62.8% increase) and Real estate (57.5% increase). Furthermore, the number of job offers fell by 39% when comparing May 2020 to May 2019 (although the number of job offers increased between April and May 2020 by 5%). Which makes finding a new job a difficult task for existing and newly unemployed as well as for labour market entrants. In Table 1 we provide a summary of the labour market impacts of this crisis in Portugal.

Between June and September 2020

Regarding Panel B of Table 1, in September 2020 the number of registered unemployed in mainland Portugal increased by 0.1% comparing to August and by 37.4% comparing to September 2019. This increase is mainly due to the increase of registered short-term unemployed (55.7% compared to September 2019). However, while in May homologous variation in long-term unemployment was nearly zero, the same variation in September was just over 13%. This confirms that as the labour market stagnates long-term unemployment may become more prevalent.

Workers without a higher education degree continue to be the most affected by the crisis. In particular, in September 2020 university graduates accounted for 15% of the stock in unemployment, and workers High School (ISCED 3) represented the largest share of registered unemployed (32%).
In September 2020, the distribution of unemployment across the three main sectors of economic activity was as follows: 73% in the tertiary sector, 21% in secondary sector and 3.8% in the primary sector. Yet again, these averages conceal differences across the activities that compose the sectors. Workers from activities related to Real estate, administrative work and support services account for 29% of total unemployment; those coming from services related to Lodging, restaurants and hotels and Gross and retail trade account for another 22% of total unemployment (11% each). In the secondary sector, the most relevant groups are: Construction (6.2% of total unemployment) and Textile, clothing and leather industries (4.3%).

The State of Emergency was replaced by a State of Calamity on May the 3rd. However, despite expectations and incentives for the economy to parsimoniously get back to business, labour market conditions continued to deteriorate during May, albeit at a slower rate. On May 27th 1,332,114 workers worked in firms that implemented partial or full-time layoff (which contrasts with only 72,507 on March 31st), more than half of these workers worked in Manufacturing, Gross and retail trade, and Restaurants and hotels (MTSSS, 2020). Therefore, the effort to make is to prevent these laid-off workers from being made redundant and dismissed permanently. Otherwise, unemployment is likely to increase in the medium term (not immediately because of the ban on dismissals associated with the layoff regulations) because of large-scale redundancies (see Figure 1). The State of Calamity continued through June 2020 and was replaced by a State of Alert which remained in place between July and mid-September in most of the country. On September 15 the Government declared a State of Contingency – which is still ongoing. In the last three months the number of workers in layoff remained high, nearly 1.4 million workers and just over 115 thousand firms were covered by the layoff scheme (see Figure 1). This may help explain why the unemployment rate has not soared (see Figure 2).

We do not have information on the type of contract of employment of newly unemployed workers. However, it is likely that firms will adjust their employment levels by dismissing the least permanent workers first. In fact, most of the extraordinary and temporary measures aimed at tackling this crisis (e.g. the simplified layoff scheme and the credit lines for firms) require that firms do not dismiss permanent workers and that they do not proceed with collective dismissals for some time (for 60 days after the layoff ends, and until December 2020 for those who take up credit lines). Self-employed workers account for 12% of total employment (14% male and 9% female), and 5% were business owners in 2019. We expect this crisis to have a significant impact on the activity and earnings of these workers. The SURE program by the EC may be an essential tool to help this group of workers.

• Slovakia, a country of 5.4 million inhabitants, recorded its first COVID-19 case on March 6, 2020, and its first death attributed to the pandemic on April 1, 2020. As of June 25, 2020, Slovakia had recorded 1,630 cases, 28 deaths, and had 150 active cases. In terms of the number of COVID-19 deaths Slovakia occupied the last place among European states
• This remarkable performance in terms of containing the first wave of the pandemic has been due to several key factors:
• Quick response – within less than a week since the first case schools and universities in Bratislava had been closed, border controls and mandatory quarantine for people returning from abroad had been introduced and non-essential shops had been closed; within ten days schools had been closed in the whole country, mandatory face masks had been introduced, and international bus, train, and air passenger services had been banned.
• The high level of compliance of the general public, supported by the example of politicians, news anchors, and media personalities, all wearing facemasks on the screen.
• Even though several mistakes have been made, the overall effectiveness of the measures taken was good.
• The numbers of daily new cases started to pick up already in July 2020, and on August 21 (123 new cases) it surpassed the maximum from April 16 (114 new cases). The psychological threshold of 1,000 daily cases was surpassed on October 8, 2,000 on October 16, and 3,000 on October 25, 2020. As of November 1, the second wave of the COVID-19 pandemic is in full swing in Slovakia. In response, as the first country in the world, in late October and early November Slovakia is testing its entire population (excluding minors below 10 years of age) using antibody tests.
• The overall economic impact of the COVID-19 pandemic in Slovakia in Q1 and Q2 2020 has been severe. Primarily due to meager foreign demand, in Q1 and Q2 2020 Slovak GDP shrank by 3.9% and 12.1% y-o-y, respectively, which were slightly larger drops than the Euro Area averages. Slovakia was still able to borrow record-high 4 billion EUR for 5 and 12 years at very solid rates (reoffer yield 0.35% for 5-yr bonds, 1.056% for 12-yr bonds); Fitch downgraded Slovakia from A+ to A on May 8, 2020, nevertheless.
• Given the strong growth in the Euro Area in Q3, 2020, a strong recovery can be expected in that quarter in Slovakia as well.
• Following a slight increase of the registered unemployment rate from 6.13% in February to 6.21% in March 2020, April 2020 marked a record-high monthly increase of the unemployment rate by 1.22 pp to 6.57% followed by further increase by 0.63 pp to 7.2% in May as reported by the Central Office of Labor, Social Affairs and Family (COLSAF) The unemployment rate however remains relatively low, compared to Slovakia’s historical data, when the unemployment rate reached about 15% just seven years ago.
• The unemployment rate peaked in July 2020, at 7.65%. Since then, it declined to 7.43% in September 2020.

• Remarkably and surprisingly, whereas employers announced 2,242 mass layoffs in March 2020 and the number increased to 3,142 in April, May witnessed just 1116 mass layoff announcements. Another positive signal from the labor market was that in May 9,665 people registered as unemployed found jobs, which was by 3,744 (63%) people more than in April. The labor market strengthened by September 2020, when 21,988 registered unemployed found jobs.
• While there were 180,756 unemployed in April and 198,256 in May 2020, COLSAF also registered 67,950 thousand vacancies in May 2020 (92,106 in May 2019), circa 4 thousand less than in April. Workers were sought especially for the positions of machine operators and specialized crafts people, and unqualified workers The labor market improved by September 2020, when COLSAF reported 76,673 thousand vacancies (97,589 in September 2019).
• Temporary agency workers and workers on fixed term contracts belong to some of the most affected groups in the labor market. Temporary agency workers are covered by the Labour Code provisions similar to regular employees and their employer (the agency) is obliged to offer at least 60% of the wage compensation if the employer cannot provide work to the temporary agency worker. The reference wage is equal to the average wage registered at the agency for the last 12 months. Data about actual layoffs of temporary agency workers is not available, but we expect that they are exposed to lay-offs more often than regular employees.
• Another vulnerable group, which is poorly protected against job loss are workers working on work agreements outside of the regular employment contract. There are two types of such agreements: (1) work agreements equivalent of part-time employment contracts and (2) work agreements for the maximum of 300 hours per year. Even if in the majority of cases employees with such work agreements are part of the social insurance system, employers are not obliged to compensate for their wages if they do not have the work for them. To compensate these workers, in mid-April the government announced that those who have a valid work agreement but cannot perform their work are entitled to a monthly subsidy of 210 EUR provided by the state as a compensation for the wage loss.

1. https://www.worldometers.info/coronavirus/
2. https://www.upsvr.gov.sk/media/medialne-spravy/celkovy-pocet-uchadzacov-o-zamestnanie-v-aprili-medzimesacne-vzrastol-o-33-613.html?page_id=1003574
3. KOZ statement before the tripartite meeting on May 18th, 2020: https://hsr.rokovania.sk/2020-/
4. https://www.ip.gov.sk/koronavirus-praca-agenturnych-zamestnancov-pocas-mimoriadnej-situacie/
5. Slovak Labour Code distinguish between fixed term contract which is regular employment contract but set on specific time period and work agreement contract, which is designated for smaller jobs (up to 20 hours per week, maximum 1 year, or for maximum 300 hours per year). While the first type establish similar employment protection as the regular open-ended employment contract (e.g. severance payment if work contract ends before the set date) in the case of work agreement, employment protection is lower, with no severance payment and only a 15-day dismissal period.

With more than 87,000 deaths (nearly 1900 COVID-19 deaths per million inhabitants compared to a world average around 650), Spain is one of the countries that has been hit hardest by the pandemics. The magnitude of the health crisis also explains why the lockdown has been stricter and longer than in most European countries. Figure 1 shows the evolution of the Government Stringency Index for Spain computed by the Oxford Coronavirus Government Response Tracker (OxCGRT), together with the evolution of new COVID-19 cases since the beginning of the pandemics up to latest data. As we can see in this figure, due to the positive evolution of the pandemic, several restrictions were relaxed before the summer of 2020, but the change in the trend in new COVID-19 cases made necessary to reintroduce some of them. In fact, during fall and winter, Spain experienced two pandemic waves that were much more intense than the first one. The situation clearly improved during the first half of 2021, although during summer 2021 the number of cases increased again, particularly among younger cohorts. However, thanks to the high number of vaccinated people (nearly 80% of total population in early November 2021 as we can see in figure 2), the public health system has not experienced the same level of collapse as in the previous waves.

According to estimates from Eurostat, Spanish GDP felt by -10.8% in 2020 compared to 2019 due to the negative impact on activity of COVID19. The drop in GDP during 2020 was much more intense in Spain than in most European countries (EU GDP decreased by -5.9% in 2020 compared to 2019). The evolution of Spanish quarterly GDP (seasonally and calendar adjusted) is shown in Figure 3, where we can see that economic activity significantly improved during the third quarter of 2020 (after the full lockdown), but since then GDP growth stagnated until more recently when it seems to start recovering the pre-pandemics trend. In fact, latest economic forecasts by the Bank of Spain published in September 2021 expect the economic recovery to consolidate during the rest of 2021 and 2022 with a year-on-year growth rate around 6%. However, consensus forecasts published in November 2021 by Funcas, a Spanish think-tank, have substantially revised downwards macroeconomic forecasts for this year with an expected growth not above 5.0%. mainly due to inflationary pressures and supplies shortages and delays.

Regarding the labour market impacts of the pandemics, data from the Labour Force Survey shown in table 1 indicates that employment rates and unemployment rates have nearly recovered pre-pandemics level by the third quarter of 2021. In fact, available information from monthly Social Security records that allows to analyze the evolution of registered employment until October 2021 shows a similar picture.

As we can see in Figure 4, registered employment already achieved the pre-pandemics level during summer 2021. The year-on-year changes in the number of employees and self-employed is shown in Figure 5 while Figure 6 shows the same information distinguishing between permanent and temporary workers. As we can see, all groups experience an unprecedented decrease in April 2020, although in the case of temporary employment, data for March 2020 were also significantly lower than in the previous month, probably due to anticipation effects. However, during the rest of 2020 and the three first quarters of 2021, trends have been very similar for all groups. Looking at the figures, we can clearly see that temporary employment is much more volatile than permanent one along the business cycle and that the values for the latest available observations show an important stabilization and recovery compared to 2020.

Figure 7 shows the evolution of registered unemployment using administrative data from Public Employment Services records. Registered unemployment increased by 21.1% in April 2020 by 25.3% in May and by 28.1% in June compared to the same month of the previous year (data for the last day of the month), reaching more than 3.8 million with an increase of 847 thousand individuals compared to June 2019. The increase affected all sectors with a similar intensity, but during 2021, in parallel to the improvement in economic activity, the trend has clearly reversed and, as we can see in figure 8, the level of unemployment at the end of October has reached the pre-pandemics level. However, it is important to highlight that unemployment has not increased to a higher extent due to the flexibility introduced in temporary employment adjustment schemes (ERTEs – Expedientes de Regulación Temporal de Empleo). Figure 9 shows the evolution of the number of workers covered by short-term work schemes (ERTEs). As we can see from the figure, in May 2020 the number of workers covered by these schemes arrived to more than 3.6 million (4.5 million when including employees and self-employed). On October 30th 2021 there were only 191 thousand workers covered by short-term work schemes, although most of them develop activities that are still subjected to full/partial restrictions that would probably still be maintained for some time.

1. Vaccination campaign has not started yet among children below 12 years old, while boosters have been already offered to those over 70 years old and they will soon be extended to other age groups.
2. https://ec.europa.eu/eurostat/databrowser/view/tec00115/default/table?lang=en
3. https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/InformesBoletinesRevistas/BoletinEconomico/21/T3/Fich/be2103-it-Rec1.pdf
4. https://www.funcas.es/textointegro/panel-de-previsiones-de-la-economia-espanola-noviembre-2021/

The first case of Covid-19 was confirmed by the Swedish Public Health Agency on January 31 in a traveler from China and a few weeks thereafter, during the second week of March, community spread was confirmed. As a response, various restrictions were imposed with the aim of slowing down the spread (or “flattening the curve”). These restrictions have been relatively mild compared to other European countries. The measures primarily rely on voluntary compliance with recommendations from the Public Health Agency regarding social distancing. During the second week of March (week 11), the Public Health Agency made several formal announcements, requiring all residents to keep a distance from each other, that high schools and universities must move their teaching online, and that workers should work remotely to the extent possible. All workers should remain at home if they have any symptoms traditionally associated with the flu or the common cold. Unnecessary travel within the country should be avoided. Gatherings were limited to 500 people; a restriction that was further tightened to 50 two weeks later. Compulsory schools (until age 15-16) have remained open and parents are obliged by law to ensure that children without symptoms attend school. Pre-schools (before age 6) also remain open but these are not covered by school attendance laws. Outdoors movement is unrestricted and encouraged for all groups as long as proper distance can be maintained. All shops and businesses can remain open but they need to ensure proper distance between customers and all employers are required to take measures that help protect their workers.

The Swedish restrictions and recommendations were designed to be durable over an extended period of time. As a consequence, there have been few changes in the restrictions over time. Recommendations against domestic travels were, however, removed in early June. High schools and universities were allowed to open for on-site teaching at the start of the fall semesters. But teaching at universities appears to remain online in many cases, in particular in metropolitan areas were students need to travel to classes with public transport.

Some descriptive indicators of the timeline of the spread of the Covid-19 virus in Sweden are collected in figure 1. With the well-known caveats associated with each such indicator, they jointly suggest a rapid spread with many new severe cases around weeks 11 to 14 followed by a levelling out and a gradual fall in new severe cases starting between week 15 and 17 depending on indicator. Starting mid-September (around week 38), there is a gradual but steady increase in the number of reported cases.

The Swedish response has been highlighted as an exception due to its comparative leniency. The response has spurred international criticisms in media and elsewhere. But the response has also been perceived as a possible route forward for other countries. The WHO (on April 20) described the Swedish response as a possible future “model” for other societies when opening up from their current lockdown policies. It may therefore be of particular interest for other countries to assess the labor market effects of the Swedish response.

In this context, it may be important to note that the Swedish response was never motivated by economic concerns per se. The response has been coordinated by the Public Health Agency with very little interference from the political sphere (or economists). The agency motivates its route by a desire to avoid negative side effects on physical and mental health from reduced mobility and isolation, and a desire to impose a regime that can be sustained for a prolonged period of time with a fully functional health-care system. The agency has firmly stated that “heard immunity” is not a policy target and that the overall aims of the policies are similar to those of other countries. At the same time, the agency considers it impossible to prevent the disease from spreading in the long term without heard immunity or vaccination.

Overall, the Swedish Covid-19 response, as interpreted through an economic lens, mostly differs from other countries in terms of degree rather than content (with the exception of the open schools). The “recommendations” are more binding than the word may suggest as residents and firms are expected to abide by them. It is obvious that the recommendations had a massive impact on people’s behavior early on. The recommendations therefore had a sharp effect on economic outcomes. Sales in restaurants dropped by 70 percent from the second week of March and sales of apparel fell by about 50 percent during the same weeks. Over time, there has been a very clear gradual reduction in the adherence to the restrictions and an increase in mobility (as we display below). As a consequence, the consumption of goods and services in some sectors that were hit hard initially has gradually started to recover. It appears as if the opening of the Swedish economy has been more gradual and “organic” than in other countries where the removal of specific temporary laws and restrictions appear to have been more instrumental.

Sweden has a total population of 10 million, whereof 7.5 million are in working age (15-74). In 2019, the labor force participation rate (73 percent) and employment rate (68 percent) were both high by international standards. The gender employment gap (4 percentage points) is also small. The unemployment rate (6.8 percent) was close to the European aver- age. Unemployment is to a large extent concentrated among low-skilled workers, recently immigrated workers, and students. The GDP-gap in 2019 was small but positive (0.5 per- cent). Unemployment increased slightly between early 2019 and early 2020. The country has its own currency and a floating exchange rate. Exports are nearly 50 percent of GDP. Public finances are sound with a relatively low level of public debt (Maastricht debt is 35 percent of GDP).

To study the immediate impact on the labor market we primarily rely on data from the Public Employment Service (PES) on workers who are registered as unemployed. In light of the comparatively mild nature of Swedish Covid-19 restrictions, it is remarkable how stark the early labor market impact was. This is, most likely, a consequence of high early rates of compliance with the public recommendations. Figure 2 documents a rapid deterioration in labor market conditions as measured by registered unemployment, reduced vacancy postings, increased layoff notices and bankruptcies. We show how these measures evolved before and during the initial phase of the crisis. In all graphs, except for the stock of unemployed, we display the accumulated flows. For comparison, we provide corresponding numbers for 2019.

The figures suggest a substantial slow-down of the Swedish labor market, primarily in the early phase of the crisis: The number of workers registered as unemployed at the PES increased by more than 100,000 people in just 3 months and the increasing trend clearly continues. During 2019, the number of registered unemployed fell by around 14,000 during the same season. The increase in registered unemployed corresponds to about 1 percent of the labor force. As is apparent, the effect is mainly driven by the inflow into registered unemployment, even though the outflow is reduced as well.

The number of new vacancies at the PES dropped by 1/3 and the number of layoff notices increased sharply from 24,000 to 84,000 compared to the same period in 2019, thus suggesting that around 1 percent of the labor force has been notified of a layoff because of the crisis. There is also a rapid relative increase in the number of workers affected by bankruptcies, although these events affect much fewer workers.

Note that there is a possible element of double-counting across indicators since redundancy notices also include bankruptcies, and an unknown fraction of workers from bankruptcies may have ended up in registered unemployment. Due to relatively long (2-6 months) advance notice periods, most of the workers affected by a layoff notice are, however, not in the unemployment statistics yet, and most workers who receive a notice do not end up in unemployment at all.

Panel B of Table suggests that the labor market has recovered slightly since the spring although numbers are still well below 2019-levels. The rebound is particularly strong in terms of job-finding rates of the unemployed. The gap in accumulated layoffs and bankruptcies has remained almost constant after the initial shock. At the same time, we see that the inflow of new vacancies to the Swedish Public Employment Service continues to decrease. By September, the accumulated number of vacancies is 42 percent lower than in 2019. One possible explanation for the full set of results is that the crisis has resulted in a more positively selected pool of unemployed workers, which could result in higher share of posted vacancies being filled.

1. Compliance with the “recommendations” have been particularly high on public holidays. Travel out of Stockholm was very limited across Easter, and parks were completely empty during April 30th (“Walpurgis”) when students traditionally celebrate the arrival of spring in public parks.
2. See https://www.caspeco.se/ and www.svenskhandel.se.
3. All numbers pertain to 2019. Labor market statistics and export share are taken from Statistics Sweden. Debt statistics are from the OECD. GDP-gap is from the National Institute for Economic Research.
4. The total number of ”registered as unemployed” usually align well with the number of unemployed in the Labor Force Surveys although the workers are not always the same. In particular, unemployed students rarely register as unemployed and participants in some labor market programs may not actively search for jobs and thus not show up as unemployed according to the LFS.
5. The size of the labor force in May 2019 was 5.5 million according to the Labor Force Surveys
6. Slightly more than half of advance notices from the spring 2020 resulted in layoffs and one quarter became unemployed at some point. The share ending up in unemployment is marginally higher than during the financial crisis. Unemployment after a notice is most prevalent in the hardest hit sectors of restaurants and hotels. The assessment is also somewhat complicated by the fact that layoff notices to the Public Employment Service only are required when firms lay off at least 5 workers, and the impact of the current crisis appears to be concentrated in sectors where there are many small firms.

According to the last official labor market statistics, the unemployment rate (registered unemployed) rose from 2.5% by end of February to a peak of 3.4% by end of May and stabilized since then on a level of 3.2%. By end of October, registered unemployment is thus 46.6% higher than in October a year ago [SECO 2020a,f]. The unemployment rate according to the ILO definition amounts to 5.3% in Q3-2020, as compared to 4.6% in Q3-2019 [BFS 2020b]. Larger immediate increases have been prevented by the extensive use of the short-time work scheme (see below). However, I expect that unemployment will further increase in the first part of 2021, due to the ongoing negative impacts of the subsequent waves of the pandemic which substantially increases the risk of bankruptcies and layoffs particularly in heavily affected industries like gastronomy, hospitality/tourism and entertainment.

The longer lock-down period during the first wave and its follow-up consequences created a substantial drop in the hours worked in the Swiss labor market. In Q2-2020, the effective weekly working hours were reduced by 9.5% compared to Q2-2020. Main drivers of this large slump were gastronomy and hospitality (-54.1%), entertainment and some personal services (-23.0%) and trade and repairs (-16.8%) [BFS 2020c]. By Q3-2020, the effective working hours drop improved to -2.7% compared to the respective last year’s quarter [BFS 2020b].

The amount of job vacancies has plummeted substantively. Within two weeks after the launch of the Covid emergency measures and lock-down (March 16th), the number of vacancies posted on job boards have decreased by 26% [Adecco Group Swiss Job Market Index/Stellenmarkt-Monitor University of Zurich]. The newly published vacancies initially fell by 45%. In May, the situation slightly recovered, but the amount of new job ads located still 30% below the comparable pre-year period [Novalytica/x28 2020a]. In the following months, recovery continued until August where the level of newly published job ads was 15% below pre-year. However, the last measurements by mid of November show that the catch-up stopped and the level of new job ads is at -18% compared to the pre-year period [Novalytica/x28 2020b]. Figure 1 shows in the left panel the weekly evolution of newly published vacancies in conjunction with the lock-down and re-opening steps. This evolution implies that, by end of May, the total number of posted vacancies (by firms and recruiters) was down to a level of approximately 130K, whereas it has been at 210K in the middle of Q1-2020 [jobradar.ch]. This massive reduction in labor demand did diminish but clearly not fully recover so far, as the right panel shows. This gives rise to the prediction that unemployment durations will further increase in the closer future.

The extent of the labor demand drop differs substantially between sectors. Figure 2 tracks the 5 sectors with the largest amount of job postings (which cover more than 35% of the newly published job ads). Whereas the catering industry postings dropped by about 75% compared to the pre-year period, and retail by about 50%, the postings in the health and public sectors were much less affected (only about 20%) by the shock wave of the first lock-down [Novalytica/x28 2020a]. Subsequently, the most substantial recoveries in the demand drop are seen in the retail and the catering sector, which most obviously benefitted from the stepwise re-openings in May and in June. However, the recovery in the catering industry did not last for long, it has also been badly hit by the second wave of the pandemic which came up towards end of October [Novalytica/x28 2020b]. The drop is of the same dimension as in the first wave, as Figure 2 shows, even though the Swiss government decided not to go into a full lock-down and restaurants remained open in some areas of the country. This substantial drop documents the rapidly worsened expectations in the catering sector, in view of an upcoming winter season and even half-year that will see continued heavy restrictions as well as fears to meet and travel.

Relatively mostly affected by increased unemployment are young workers. The number of youth unemployed (< 25 years) by end of May rose by 76.7% as compared to a year ago, reaching a rate of 3.4% [SECO 2020a]. The youth unemployment rate continued to rise to 3.9% in August, undoing the improvements over the last two years. By October, the rate declined a bit to 3.3% — thus, currently it seems to stabilize at a level which was common for the years 2012 to 2016, as Figure 3 documents. The youth unemployment rate by ILO definition amounts in Q3-2020 to 11.6% (EU: 17.9% as comparison) [BFS 2020b]. So far, youth unemployment did not reach the peak level of the financial crisis (5.4% by SECO definition, see Figure 3). One reason that prevented the youth unemployment rate from going higher so far is the stability on the apprenticeship market: in spite of the crisis, the firms did not significantly reduce the offer of apprenticeships (see also further below).

The impact of the Covid crisis on rising unemployment is broadly spread across industries and jobs. Massively affected is the gastronomy and hospitality sector, over-proportionally affected are construction and the machine, watch and metal industries. Areas within Switzerland that heavily rely on tourism tend to show larger increases in the local unemployment rates. Also, areas where export-oriented industries (except pharmaceuticals) and finance are strongly represented tend to suffer relatively more. Interestingly, the unemployment shock affected both of each, women and men, foreigners and Swiss, German-speaking and Latin areas, to about the same relative extent.

Long-term unemployment started to rise substantially in the last months since March 2020. This is not unexpected because, as mentioned earlier, the relatively persistent drop in labor demand makes success in job search more difficult. As Figure 4 shows, already by the end of October the level of long-term unemployment reached the level of the last peak, dating back to February 2017. A further increase is to be expected. The duration of the continued health crisis and the reduced labor demand will crucially determine whether long-term unemployment will soon reach the levels of the Financial Crisis or not.

By the end of April, about half of the total Swiss workforce (5.1 million workers in Q1-2020, [BFS 2020a]) did rely on some support of one of the main (extended) social insurance/support schemes, i.e. unemployment insurance, the short-time work scheme or the Income Compensation Act (EO, Erwerbsersatzordnung). For more details on the use and evolution of short-time work, see section “Support of dependent workers” below.

1. These are the official figures for the rate of registered unemployment (i.e., in unemployment insurance), reported by the Swiss State Secretariat of Economic Affairs (SECO). The unemployment rate according to the ILO definition, based on the labour force survey, amounts to 4.5% for Q1-2020 (not yet affected by Covid) [BFS 2020a, Swiss Federal Statistical Office].
2. The youth unemployment rate by ILO definition is at 7.2% in Q1-2020 [BFS 2020a], before Covid. (EU: 15.3%)

According to the latest official figures released by the Office for National Statistics (ONS), the UK labour market has been hit hard by the COVID-19 crisis. Between March and September 2020, there was a 673,000 fall in employee jobs (Figure 1), and an unprecedentedly large increase in unemployment claims of 1.5 million, representing a 115% increase from March to July (Figure 2). For both employment and the claimant count most of the change occurred during April and May.

The unemployment rate measured using data from the Quarterly Labour Force Survey (QLFS) remained relatively stable until the beginning of July (Quarter 3 Week 1 – Figure 3). Subsequent to this, an upward trend starts to be visible – according to the latest ONS statistics the average unemployment rate from June to August was 4.5%. Table 1 shows how different age groups and gender experienced a change in their probability of becoming unemployment relative to the pre-lockdown months of 2020 until the end of June. Younger workers (16 to 24 years of age) have seen a statistically significant increase in their unemployment probability of 0.8 percentage points, with other older workers showing insignificant changes during this period. The change in the probability of unemployment was similar and statistically indistinguishable across genders.

Both employment counts and unemployment rates are very likely to be misleading with respect to the real impact of the COVID-19 crisis on the UK labour market. As pointed in work by Bell et al (2020), these statistics do not account for the substantial drop in hours worked in the economy and the government job protection assistance that largely shielded workers from losing their jobs during the period of analysis.

After a pronounced drop between March and June of 56%, vacancies increased during July and August, but at 517,000 still remain 32% below March levels (Figure 4). Similarly, in Figure 5 one can observe that after the largest annual decrease in average weekly hours of the past 10 years occurred (falling by 6.9 hours), average hours have slowly recovered until the end July (but still remaining 3.6 hours lower). Table 2 offers the breakdown across age groups and gender with respect to total hours worked. All age groups have seen their hours drop significantly and in comparable absolute terms, however when adjusted to their pre-lockdown mean we find that a similar detrimental pattern towards younger workers with significantly lower percentage drops (27.6%) relative to older workers (17.5% to 23.2%). The differential impact between male and female workers is significantly different in absolute magnitudes with women seeing a lower reduction in hours of 1.4 hours on average compared to their male counterpart, however this gap disappears when adjusted to the pre-lockdown mean of the groups (0.2%). Not surprisingly the abrupt drop in hours worked was caused primarily by a very significant increase in workers temporarily away from paid work as seen in Figure 6. This increase was steep and almost immediate following the lockdown announcement, two weeks after lockdown the count of workers declaring to be temporarily away from work had increase by 3 times the pre-lockdown level to 7.7 million. Once again younger worker experienced a shaper increase in their probability of being temporarily away of 22.5 percentage points when compared to older workers (13.2 to 17 percentage points), without no significant gender differentials (Table 3). Figure 7 presents the evolution of workers declaring to have worked fewer hours than usual by cause: hours vary, sickness or injury, economic conditions (laid off/short time/work interrupted), personal reasons (emergencies, family and/or personal reasons) or others (bank holiday, maternity/paternity leave…). A striking pattern emerges post-lockdown with a sharp increase among those declaring economic conditions and others as causes of their decrease in hours. Looking at the probability of declaring lay off/short time as the reason behind the hour shrinkage among employed workers, Table 4 shows that this has increased by 13.3 percentage points post-lockdown with stronger effects among the young and a significant although small gender differential in detriment of women.

Between the months of April to July average earnings growth has been falling accumulatively -3.9% for total pay (August showing a recovery of 1.9%) and median pay after a fall until June has recovered to March levels in August for payrolled employees. The most recently available monthly GDP growth statistic points to an unprecedented contraction of the economy beginning in March with a 1.8 % fall (compared to the three months prior) followed by sustained falls ranging from 10.4 % (April) to 21.7 % (June) with latest available estimate of 12.3% in August. This contraction of the economy vastly surpasses that experienced at the peak of the 2008 financial crisis (Figure 8).

The most affected sectors are customer-oriented personal and domestic services: Non-food, non-pharmaceutical retail; passenger transport; accommodation and food; travel; childcare; arts and leisure; personal care; domestic services. The combined employment in these sector accounts for roughly 15% of employees in the UK. These sectors have experienced the large contractions in output with gross valued added growth since March on negative ground of 19.6%, and as high as a staggering 46.9% for accommodation and food service activities (Figure 9). According to the latest ONS survey figures, with the relaxing of lockdown restrictions the sectors that previously reported higher percentages of temporary cease of trading, accommodation and food service activities (74%) and arts, entertainment and recreation (75%), show as of late August percentages of currently trading of 85.1% and 67.2% respectively. Despite the shy recovery in overall vacancies, drops remain significant in these sectors (49% and 79% respectively) with Figure 10 showing that not all sectors have been equally hit.

The composition of workforce in most affected sectors is not homogeneous: being disproportionally young (2.5 times more likely to work in sector in lockdown), concentrated among low earners (7 times more likely to work in sector in lockdown), gender biased (women are 33% more likely to work in sector in lockdown), self-employed intensive (22% of self-employed work in affected sectors). According to the latest QLFS data and as shown in Figure 5 the loss in weekly hours worked has been particularly pronounced among the self-employed with a drop of 8.7 hours on average comparing the periods pre- and post-lockdown until the end of July. Weekly hours worked prior to lockdown had been on average similar between employees and self-employed (32.2 and 31.9) but the lockdown has affected the self-employed significantly more with a 27% drop in hours relative to 10% felt by employees. The sharper fall in hours of self-employed does not exhibit significant differential patterns across ages or gender. Further analysis of QLFS data shows that, adding to the steeper reduction in hours, self-employed workers have seen a sustained drop in their employment count, 200,000 since March to July (5.8% reduction) significantly more noticeable than employee workers.

1. Note that employment numbers as presented are likely to underestimate the actual fall in total work as they do not account for self-employment.
2. Unfortunately the microdata referring to the month of July is not available at this point in time, although main aggregate statistics such as unemployment rate have been already produced by ONS.
3. Exception to the significant decrease among older workers (55–64) of 1 percentage points.
4. Business Impact of COVID-19 Survey, 24 August – 6 September, ONS.
5. The May figures show a slight improvement relative to the temporary cease of trading experienced in the April by the same sector (80% and 81%).
6. See Joyce and Xu (2020).
7. Authors’ calculations.

Official statistics on labor market status, including unemployment, for the United States are based on a monthly household survey, the Current Population Survey (CPS). They are released at the beginning of each month and reflect the unemployment situation in the middle of the prior month (specifically, the week including the 12th of the month). A separate survey of employers tracks changes in payroll employment.

Widespread mandatory business closures and social distancing practices beginning in the spring of 2020 led to an unprecedented fall in employment and rise in unemployment in the United States. According to the U.S. Bureau of Labor Statistics (BLS), in just a two-month period from February to April 2020, the number of (seasonally-adjusted) payroll jobs dropped by more than 22 million, or nearly 15 percent, and the official unemployment rate jumped from 3.5 percent to 14.7 percent, the highest since the Great Depression of the 1930s. Job losses were widespread across sectors but were especially steep in leisure and hospitality, education and health, professional and business services (particularly temporary help agencies), and retail trade. Owing to potential problems in the coding by interviewers of individuals who were not at work during the survey week, the BLS reported that the unemployment rate could have been up to 5 percentage points higher. The employment-to-population ratio for those age 16 and older, also known as the employment rate, was 51.3 percent, the lowest rate recorded in the history of the series, which dates back to January 1948. At the same time, the number of people on unemployment insurance spiked, peaking at 25.9 million in early May 2020. Since then, the employment situation has greatly improved, reflecting the removal of restrictions on business openings in the second half of 2020 and the widespread availability of vaccines against the virus beginning in 2021.

Figure 1 depicts monthly estimates of the employment rate for “prime-age workers”—those age 25-54 who generally have completed their schooling and have not yet retired. The employment rate for this group plummeted by over 10 percentage points in two months from 80.3 percent in February 2020 to 69.8 in April. Since then, it has steadily risen and by November 2021 was only 1.5 percentage points below the employment rate two years earlier.

The number of payroll jobs also has grown strongly, though in November 2021 there were still nearly 4 million fewer than the number recorded just before the start of the pandemic. The employer payroll survey does not capture self-employment, and data suggest that growth in the number who are self-employed accounts for some of the shortfall in jobs in that survey. Data from the U.S. Census Bureau on new business formations show a spike in new business applications since the start of the pandemic, particularly among businesses without employees. The CPS also shows an increase among the employed of about half a percentage point in the share who report being self-employed.

Administrative data on the number receiving unemployment insurance, which are published weekly, similarly depict a surge in unemployment during the crisis and return to pre-pandemic levels by late 2021. Figure 2 displays trends in the number of people previously in wage and salary jobs receiving regular state unemployment benefits from November 2019 to November 2021. That number started rising sharply in mid-March 2020 and peaked at 25.9 million in early May 2020. Analysis of unemployment insurance claims from the state of California in the spring of 2020 revealed extraordinarily high rates of claims among young and low-educated workers. By May 2020, one-third of California’s wage and salary workers age 16-23 and one-fourth of those age 24-39 had filed for unemployment benefits. Especially striking is the fact that nearly half of those without any college education in California had applied for unemployment benefits.

Since the early stage of the pandemic, the number receiving unemployment insurance has steadily fallen. By late November 2021 it was under 2 million and in line with pre-pandemic levels. Because this figure does not count those who are unemployed but do not normally qualify for unemployment benefits, which includes the self-employed, new entrants to the labor force, and those who have exhausted their regular unemployment benefits, the concept is different from the unemployment concept measured in the household survey.

In addition to job loss, many people experienced lower earnings because of reduced hours or a pay cut owing to the financial stress experienced by their employer or their business. Data from the U.S. Census Bureau for October 2020 show that 45 percent of those surveyed reported that they or someone in their household had experienced a loss of employment income in the prior 7 months. Those who were minorities, had low educational attainment, had low household incomes, and had children were substantially more likely to report a decline in income.

Although labor markets have largely recovered, the pandemic affected, and continues to affect, the employment situation of some groups more seriously than others. Jobs in the hospitality sector and brick-and-mortar retail stores, where minorities and those with low educational attainment are disproportionately employed, were among the hardest hit during the recession. Figures 3a and 3b display the seasonally unadjusted monthly employment rates from November 2019 through November 2021 for prime age men and women by educational attainment (high school degree or less, some college, and four-year college or post graduate degree). From November 2019 to April 2020 the employment rate fell by 14.5 percentage points among men with no more than a high school education and by 12.3 percentage points among men with some college, compared to 6.9 percentage points among men with a college education. Employment declines among women followed similar patterns but were somewhat more severe during this period, dropping by 15.1 percentage points for women with a high school degree or less, 12.4 percentage points for women with some college, and 8.4 percentage points for women with a college education. Although by November 2021, employment rates for college-educated men and women and women with some college were nearly back to their pre-pandemic levels, the employment rates among men and women with lower educational attainments were 2.0 to 2.5 percentage points lower than two years earlier. The employment rate among African Americans also remains more than 2 percentage points lower than its pre-pandemic levels and substantially lower than that of White Americans.

Notwithstanding problems among these groups, the overall aggregate labor market in the United States was strong by the second half of 2021. In recent months, U.S. workers have quit their jobs at record rates in what has been dubbed the “Great Resignation,” and U.S. employers have reported substantial difficulty finding qualified workers, leading to wage increases.

1. https://www.census.gov/econ/bfs/index.html
2. https://www.capolicylab.org/wp-content/uploads/2020/05/May-21st-Analysis-of-California-UI-Claims-During-the-COVID-19-Pandemic.pdf
3. https://www.census.gov/data/tables/2020/demo/hhp/hhp17.html